UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:
February 28, 2017
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to _____________
Commission File No.
000-52669
MONAKER GROUP,
INC.
(Exact name of registrant as specified in its charter)
Nevada
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26-3509845
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(State or other jurisdiction of
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(I.R.S. employer
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incorporation or formation)
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identification number)
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2690 Weston Road, Suite 200
Weston, FL 33331
(Address of principal executive offices)
(954) 888-9779
(Registrant’s telephone number)
Securities registered
under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.00001 par value per share
(Title of Class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
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No
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Yes
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No
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
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Yes
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No
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
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Yes
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No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
☐
Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes
☒
No
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant on August 31, 2016, based on a closing price of $3.80 was approximately $20,708,522.
As of May 3, 2017, the registrant had 11,344,182 shares
of its common stock, par value $0.00001 per share, outstanding.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Discussions in this Annual Report on Form 10-K
(this “Annual Report”), including those under the captions “Business,” “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These
include statements that involve expectations, plans or intentions (such as those relating to future business, future results of
operations or financial condition, new or planned features or services, or management strategies) based on our management’s
current beliefs and assumptions. You can identify these forward-looking statements by words such as “may,” “will,”
“would,” “should,” “could,” “expect,” “anticipate,” “believe,”
“estimate,” “intend,” “plan” and other similar expressions. These forward-looking statements
involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our
forward-looking statements. Such risks and uncertainties include, among others, those discussed under the caption “Risk Factors”
of this Annual Report, as well as in our consolidated financial statements, related notes, and the other information appearing
elsewhere in this report and our other filings with the Securities and Exchange Commission, or the SEC. Given these risks and uncertainties,
you should not place undue reliance on these forward-looking statements. We do not intend, and, except as required by law, we undertake
no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future
events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking
statements
.
Where You Can Find Other Information
We file annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished
pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. You may read and copy these materials
at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation
of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (http: //www.sec.gov) that
contains reports, proxy and information statements and other information regarding us and other companies that file materials with
the SEC electronically. Our periodic filings can also be found at monakergroup.com under “Financial Information”.
In this Annual Report, we may rely on and refer
to information regarding the global vacation rental industry in general from market research reports, analyst reports and other
publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness
of this information, and we have not independently verified any of it.
PART I
Unless the context requires
otherwise, references to the “
Company,
” “
we,
” “
us,
” “
our,
”
“
Monaker
” and “
Monaker Group, Inc.
” refer specifically to Monaker Group, Inc. and its consolidated
subsidiaries including Extraordinary Vacations USA, Inc. (100% interest), NextTrip Holdings, Inc. (100% interest), Voyages North
America, LLC (72.5% interest) and Name Your Fee, LLC (51% interest which was sold in May 2016).
In
addition, unless the context otherwise requires and for the purposes of this report only:
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“
Exchange Act
” refers to the Securities
Exchange Act of 1934, as amended;
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“
SEC
” or the “
Commission
”
refers to the United States Securities and Exchange Commission;
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“
Securities Act
” refers to the Securities
Act of 1933, as amended; and
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“
FYE
” means fiscal year end.
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Item 1. Business.
Organizational History
Our predecessor, Maximus Exploration Corporation,
was incorporated in the State of Nevada on December 29, 2005, and was a reporting ‘shell company’ as defined in Rule
405 of the Securities Act (“Maximus”). Extraordinary Vacations Group, Inc. (“EXVG”) was incorporated in
the State of Nevada in June 2004. Extraordinary Vacations USA Inc. (“EVUSA”), EXVG’s wholly-owned subsidiary,
is a Delaware corporation, incorporated on June 24, 2002. On October 9, 2008, EXVG agreed to sell 100% of EVUSA to Maximus and
consummated a reverse merger with Maximus. Maximus then changed its name to Next 1 Interactive, Inc. On June 24, 2015 we changed
our name to Monaker Group, Inc.
On May 12, 2012, we effected a 1:500 reverse stock-split
of all of our outstanding shares of common stock, which has been retroactively reflected herein.
On June 25, 2015, we effected a 1:50 reverse stock-split
of all of our outstanding shares of common stock, which has been retroactively reflected herein.
Executive Offices and Telephone Number
Our principal executive offices are located at
2690 Weston Road, Suite 200, Weston, Florida 33331 and our telephone number is (954) 888-9779. Our web hosting operations are based
in Florida and at Rackspace Hosting, Inc., an off-site hosting facility. Additional information about us is available on our website
at www.monakergroup.com. The information on our website is not incorporated herein by reference.
Overview
Monaker Group, Inc. and
its subsidiaries operate online marketplaces for the alternative lodging rental industry and facilitate access to alternative lodging
rentals to other distributors. Alternative lodging rentals (ALRs) are whole unit vacation homes or timeshare resort units that
are fully furnished, privately owned residential properties, including homes, condominiums, apartments, villas and cabins that
property owners and managers rent to the public on a nightly, weekly or monthly basis. Our marketplace, NextTrip.com, unites travelers
seeking ALRs online with property owners and managers of vacation rental properties located in countries around the world. As an
added feature to our ALR offering, we also provide access to airline, car rental, hotel and activities products along with concierge
tours and activities, at the destinations, that are catered to the traveler through our Maupintour products.
Our ambition is to become
the largest vacation rental platform in the world with auxiliary services so travelers can purchase vacations through NextTrip.com,
Maupintour.com or EXVG.com (or through distributors the Company provides ALRs to) and to provide the most qualified inquiries and
bookings to property owners and managers. The Company serves three major constituents: (1) property owners and managers, (2) travelers
and (3) other distributors. Property owners and managers provide detailed listings of their properties to the Company with the
goal of reaching a broad audience of travelers seeking ALRs. The property owners and managers provide us their properties, at a
preferential rate for each booking and, in return, their properties are listed for free as an available ALR on NextTrip.com (as
well as other distributors who the Company has provided ALRs to). Travelers visit NextTrip.com (as well as other distributors who
the Company has provided ALRs to) and are able to search and compare our large and detailed inventory of listings to find ALRs
meeting their needs.
The global vacation rental
industry is large and growing, but it is also fragmented and inefficient. We believe we will benefit from having both (a) a broad
selection of ALR listings, and (b) a large audience of travelers who visit (i) NextTrip.com, Maupintour.com or EXVG.com as well
as (ii) other distributors who the Company provides ALRs to. We believe that the broad selection of ALRs will attract more travelers
and the large audience of travelers will in turn attract more ALRs from property owners and managers.
Monaker is a technology driven travel and logistics
company with ALR products as its distinguishing niche. The ALRs are owned and leased by third parties and are available to rent
through Monaker’s websites as well as other distributors who Monaker has provided ALRs to. Monaker’s services include
critical elements such as technology, an extensive film library, media distribution, trusted brands and established partnerships
that enhance product offerings and reach. We believe that consumers are quickly adopting video for researching and educating themselves
prior to purchases, and Monaker has carefully amassed video content, media distribution, key industry relationships and a prestigious
Travel Brand as cornerstones for the development and planned deployment of core-technology on both proprietary and partnership
platforms.
Summary
Monaker sells travel services to leisure and corporate
customers around the world. Our primary focus is on providing
ALR options as well as providing schedule, pricing and availability information for booking reservations for airlines, hotels,
rental cars, cruises and other travel products such as sightseeing tours, show and event tickets and theme park passes. The Company
sells these travel services both individually and as components of dynamically-assembled packaged travel vacations and trips.
In addition, the Company provides content that presents travelers with information about travel destinations, maps and other travel
details; this content information is the product of proprietary video-centered technology that allows the Company to create targeted
travel videos from its film libraries. In April 2017, the Company introduced its new Travel Platform under the NextTrip brand.
This platform continues to be improved with a focus on maximizing the consumer’s experience and assisting them in the decision
and purchasing process.
The platform is a combination of proprietary and
licensed technology (described below) that connects and searches large travel suppliers of alternative lodging inventories to present
to consumers comprehensive and optimal alternatives at the most inexpensive rates to choose from.
The Company sells its travel services through various
distribution channels. The primary distribution channel will be through its own website at NextTrip.com and the NextTrip mobile
application (“app”), which are in the process of being completed and are not yet operational. The second distribution
channel is selling travel services to customers through a toll-free telephone number designed to assist customers with complex
or high-priced offerings of Maupintour, which is operational as of the date of this report. The remaining distribution channels
are in the final stages of deployment and include sales on (i) other travel companies’ websites and (ii) networks of third-party
travel agents.
Monaker’s core holdings include
NextTrip.com, Maupintour.com and EXVG.com. NextTrip.com is the primary website, where travel services and products are booked.
The travel services and products include ALRs; tours; activities/attractions; airline; hotel; and car rentals. Maupintour complements
the Nextrip.com offering by providing high-end tour packages and activities/attractions. EXVG.com is a specialized secondary website
devoted to those ALRs that cannot be booked on a real-time basis. These ALRs tend to be sourced from owners and managers who have
not invested in a reservation management system and/or the owner or manager prefers to personally vet the customer before accepting
a booking; typically because the ALR is a high value property. EXVG.com travel services and products will only include the aforementioned
ALRs and tours from Maupintour.
The Company owns an approximately 27%
interest in RealBiz Media Group, Inc. (“RealBiz”) as of February 28, 2017 which is represented by 44,470,101 RealBiz
Preferred Series A Shares and 10,359,890 shares of RealBiz common stock. In addition, the Company is owed in excess of $11.2 million
in funds as a net receivable balance due from RealBiz for amounts paid for the benefits and services provided by Monaker on behalf
of RealBiz. Both the shares and the net receivable have been written down to zero ($0) to reflect the realizable value of
this investment and asset. The Company previously consolidated RealBiz through October 31, 2014, the deconsolidation date. On November
16, 2016, RealBiz notified Monaker that the Board of Directors of RealBiz voted to cancel and retire all issued and outstanding
shares of RealBiz Preferred Stock and all but 1,341,533 shares of common stock of RealBiz held by Monaker. RealBiz’s announced
cancellation and retirement was without Monaker’s consent, and done in violation of Delaware law, federal law and the terms
of RealBiz’s preferred and common stock. We filed a complaint on November 30, 2016 (Monaker Group, Inc., f/k/a Next 1 Interactive,
Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs, Inc. and American Stock Transfer & Trust Company, LLC Case No.: 1:16-cv-24978-DLG),
seeking damages and injunctive and declaratory relief, arising from RealBiz’s declared cancellation and retirement of the
shares.
Products and Services
Monaker’s main focus is marketing ALR options
directly to consumers and to other travel distributors. The Company’s concentration on ALRs is driven by contracts with vacation
home unit owners and managers as well as owners, developers and managers of timeshare resort units that are made available to consumers
and other travel portals (distributors) for nightly or extended stays. In addition, we augment our product offering to travelers
by arranging for activities and tours through our subsidiary website Maupintour. Therefore, not only is a traveler identifying
a destination and the lodging at the destination but we can provide options of activities to engage in while at the destination.
Lastly, we provide the means for making arrangements for the airline tickets and car rentals if desired and, if the traveler does
not subscribe to the ALR accommodations, hotel rooms can also be selected. Therefore, Monaker, through NextTrip, offers travelers
the complete travel package made easy or…
Travel Made Easy
TM
Products and Services
For Property Owners And Managers
Performance-based listings.
Performance-based listings allow property owners and managers to list a property with no initial upfront fees and receive the
negotiated preferential rate on traveler bookings generated on our websites.
Listings that are ‘real-time
online bookable’ properties are managed by the property owner or manager through an application program interface (API) which
provides real-time updates to each property and immediately notifies the property owner or manager of all information regarding
bookings, modifications to bookings and cancellations of bookings. Information such as content, descriptions and images are provided
to us through that API.
Listings that are ‘request-accept’
are properties that require communication and approval from the property owner or manager (hence ‘request-accept’),
are not managed through an API (as discussed above). We provide a set of tools for the property owner or manager which enables
them to manage an availability calendar, reservations, inquiries and the content of the listing. These tools allow the property
owner or manager to create the listing by uploading photographs, text descriptions or lists of amenities, a map showing the location
of the property, and property availability, all of which can be updated throughout the term of the listing. Each listing provides
travelers the ability to use email or other methods to contact property owners and managers.
The listings include tools
and services to help property owners and managers run their vacation rental businesses more efficiently such as to responding to
and manage inquiries, preparing and sending rental quotes and payment invoices, allowing travelers to book online, including
being able to enter into rental agreements with travelers online, and processing online payments. Property owners and managers
that elect to process online payments are subject to a transaction fee.
Redistribution of Listings.
We make selected, online bookable properties available to online travel agencies as well as channel partners. These properties
have a listing on one of our websites. We are compensated for these services by receiving a negotiated net rate for each booking.
Products and Services
for Travelers
Search Tools and Ability
to Compare
. Our online marketplace NextTrip.com provides travelers with tools to search for and filter several travel
products including air, car, accommodations (including ALRs) and activities based on various criteria, such as destination, travel
dates, type of property, number of bedrooms, amenities, price, or keywords.
Traveler Login.
Travelers are able to create accounts on the NextTrip.com website that enable them to share their travel experiences and share
advice through the social media component (Discover) of the website. Videos and pictures as well as travel articles and blogs can
be accessed through Discover. They can also benefit from other features such as the ability to save lists of favorite properties
and send them to family and friends.
Security.
We
use a combination of technology and human review to evaluate the content of listings and to screen for inaccuracies or fraud with
the goal of providing only accurate and trustworthy information to travelers.
Reviews and Ratings.
Travelers are invited to submit online reviews of the vacation rentals they have rented through our websites. These reviews are
intended to convey the accuracy of the listing information found on our websites.
Communication.
Travelers who have created an account on our website receive regular communications, including notices about places of interest,
special offers, new listings, and an email newsletter. The newsletter is available to any traveler who agrees to receive it and
offers introductions to new destinations and vacation rentals, as well as tips and useful information when staying in vacation
rentals.
Mobile Websites and
Applications.
We provide versions of our websites formatted for web browsers, smart-phones and tablets so that property
owners, managers and travelers can access our websites and tools from mobile devices.
Competition
The market to provide
listing, searching and marketing services whether they are ALR, activities and tours, airline bookings, car rentals or hotel stays
is highly competitive and fragmented with limited barriers to entry. Each of the services we provide to property owners, managers
and travelers is currently offered by competitors. Furthermore, ALRs are not typically marketed exclusively through any single
channel, and many of our listing agreements are not exclusive, potentially allowing our competitors to aggregate a set of listings
similar to ours. We believe we compete primarily on the basis of the quantity, quality, and nature of the properties offered on
our websites. The majority of ALRs offered in our marketplace reflect a whole house or property rather than a room. In addition,
we benefit from the quality of the direct relationships we have with property owners and managers, the global diversity of the
ALRs available on our websites, the quality of our websites, the tools provided to our property owners and managers, brand identity,
the success of our marketing programs and price.
Our principal competitors
include:
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other vacation and short-term
rental listing websites, such as TripAdvisor.com, HomeAway.com and Airbnb.com;
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websites that list both
rooms to rent as well as ALRs, such as Airbnb.com, HomeAway.com, Wimdu.com and HouseTrip.com;
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professional property
managers who charge a percentage of booking revenue for their services, such as Wyndham Worldwide Corp. and InterHome, AG;
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hotels that offer large
rooms and amenities common in ALRs, such as Hyatt Vacation Clubs and Four Seasons Resorts;
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websites that aggregate
listings from property managers who advertise and take bookings on behalf of property managers, such as Perfect Places, Inc.,
Atraveo and E-Domizil;
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online travel websites,
such as those operated by Expedia.com, Hotels.com, Kayak.com, Booking.com, Orbitz.com, Priceline.com and Travelocity.com, that
have traditionally provided comprehensive travel services and may expand or are now expanding into the ALR category;
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timeshare exchange companies,
such as Interval International, Inc. and RCI, LLC;
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large Internet companies,
such as Craigslist, Inc., eBay Inc., Google Inc., MSN.com and Yahoo!, which provide vacation rental listing or search services
in addition to a wide variety of other products or services; and
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offline publishers of
classified vacation rental listings, including regional newspapers and travel-related magazines.
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For a discussion of the
risks attendant to the highly competitive nature of our market, see the information under the heading “Risk Factors”
below under the caption “The market in which we participate is highly competitive, and we may be unable to compete successfully
with our current or future competitors.”
Seasonality
Property owners and managers
tend to list their properties when travelers are most likely to make vacation plans. The timing primarily depends on whether travelers
are taking a winter or summer vacation and tends to vary by country. We typically have the highest level of listings in the first
quarter of the year, which is typically when travelers are making plans for summer vacations in the United States and Europe. The
lowest level of listings are expected in the third quarter. By the fourth quarter, we typically see property owners and managers
of winter vacation destinations list in time to meet the needs of travelers planning those trips. Other vacation areas outside
of the United States and Europe also have seasonality, which may not be reflected in the same quarters.
As listings grow, the
seasonality of those transactions may result in higher revenues in the summer and winter vacation months. We also expect seasonality
in the number of visitors to our websites, with the first quarter having the highest number of visitors.
Research and Development
We have developed proprietary
systems to create, maintain and operate our websites. This technology consists of systems developed by internal and third
party designers, developers and engineers and software acquired or licensed from outside developers and companies. As soon
as the development is complete (which is planned to be completed in the next few months, if not sooner), those third party designers,
developers and engineers will be employed as full time employees. Our systems are designed to serve other property distributors,
property owners, managers and travelers in an automated and scalable fashion. Costs associated with our research and development
are included as capitalized development costs or included in several expenses including technology and development, salaries and
benefits and in general and administrative expenses.
Technology and Infrastructure
Our websites are hosted
using a combination of third-party data centers distributed globally across multiple regions. Our systems architecture
has been designed to manage increases in traffic on our websites through the addition of server and network hardware without making
software changes. Our third-party data centers provide our online marketplace with scalable and redundant Internet connectivity
and redundant power and cooling to our hosting environments. We use security methods to ensure the integrity of our networks
and protection of confidential data collected and stored on our servers, and we have developed and use internal policies and procedures
to protect the personal information of our property owners, managers and travelers using our websites that we collect and use as
part of our normal operations. Access to our networks, and the servers and databases, on which confidential data is stored,
is protected by industry standard firewall technology. We test for unauthorized external access to the network daily using
automated services and conduct periodic audits performed by our internal staff. Physical access to our servers and related
equipment is secured by limiting access to the data center to operations personnel only. Costs associated with our web hosting
operation are included in general and administrative costs.
Intellectual Property
Our intellectual property
includes the content of our websites, our registered domain names, our registered and unregistered trademarks, contracts with third
party property managers and distributors. We believe that our intellectual property is an essential asset of our business and that
our registered domain names and our technology infrastructure currently give us a competitive advantage in the online market for
ALR listings and arrangements with attractions and tour operators. We rely on a combination of trademark, copyright and trade secret
laws in the United States as well as contractual provisions, to protect our proprietary technology and our brands. We also rely
on copyright laws to protect the appearance and design of our sites and applications, although to date we have not registered for
copyright protection on any particular content. We have registered numerous Internet domain names related to our business in order
to protect our proprietary interests. We also enter into confidentiality and invention assignment agreements with our employees
and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner.
The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions,
it may be possible for other parties to copy or otherwise obtain and use the content of our websites or our brand names without
authorization.
We operate a YouTube channel and have over 16,000
hours of raw travel footage to draw from.
The primary web properties are:
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monakergroup.com
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nexttrip.com (and nextrip.com)
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maupintour.com
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voyage.tv
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exvg.com (and extraordinaryvacations.com)
Please see the information under the heading “Risk
Factors” under the caption “If we do not adequately protect our intellectual property, our ability to compete could
be impaired.”
Recent Events Through
Year-End
On October 5, 2016, the
Company engaged a consultant to provide advisory services in connection with a potential offering of securities for a term of six
months. For compensation the consultant received 150,000 restricted common shares vesting immediately and warrants to purchase
500,000 shares of common stock, with an exercise price of $2 per share, and one year term. In the event the Company, as a result
of the services of the consultant, successfully closes on a $3 million financing deal, the consultant will receive an additional
150,000 restricted common shares. The financing did not occur and the warrants were terminated.
On October 26, 2016, we
received $420,000 in proceeds from the exercise of warrants to purchase 280,000 shares of the Company’s common stock with
an exercise price of $1.50 per share from the Donald P Monaco Insurance Trust (whose trustee is Donald Monaco a director of the
Company) and issued 280,000 shares of common stock in connection therewith.
On December 1, 2016, we
received $10,000 in proceeds and issued 20,000 shares of common stock in connection with the exercise of a warrant to purchase
20,000 shares of common stock with an exercise price of $0.50 per share.
On December 6, 2016, we
received $50,000 in proceeds and issued 25,000 shares of common stock and common stock warrants exercisable on a cashless basis
to purchase 25,000 shares of common stock, expiring on April 30, 2017, with an exercise price of $1.50 per share, in connection
with a private placement investment by an accredited investor evidenced by a subscription agreement.
On December 6, 2016, we
received $42,500 in proceeds and issued 85,000 shares of common stock in connection with the exercise of a warrant to purchase
85,000 shares of common stock with an exercise price of $0.50 per share.
On December 7, 2016, we
issued 20,000 shares of common stock, valued at $40,000, for payment due pursuant to the terms of a consulting agreement.
On December 14, 2016,
we issued 4,160 shares of common stock, valued at $8,320 and common stock warrants exercisable on a cashless basis to purchase
4,160 shares of common stock, expiring on December 12, 2017, with an exercise price of $2.00 per share, pursuant to a consulting
agreement.
On December 20, 2016,
we borrowed $37,500 from In Room Retail, which was evidenced by a Promissory Note (“Note”) in the principal amount
of $37,500, which accrued interest at the rate of 6% per annum. William Kerby, a member of the Board of Directors and executive
of the Company, is the managing member of In Room Retail.
As of December 31, 2016,
we entered into an Investor Relations and Financial Consulting Services Agreement with Capital Market Access (CMA) for a term of
90 days at $2,500 per month for the first three months, which agreement automatically renews for an additional 90 days thereafter,
at a rate of $5,300 per month. In addition we agreed to issue CMA 150,000 shares of common stock which will vest to CMA at a rate
of 3,000 shares of common stock per month plus (i) a performance-based compensation that amounts to 15,000 common shares for introductions
that result in the purchase of 2.5% of our outstanding shares, (ii) research coverage that amounts to 15,000 common shares for
initiation of non-paid equity research coverage on us, (iii) 15,000 common shares each for achieving a three month average trading
volume of $50,000 and $100,000 of our common stock, respectively, and (iv) warrants to purchase 150,000 shares of our common stock
(warrants to purchase 50,000 shares with a $3.00 strike price vesting 90 days from the effective date of the agreement, warrants
to purchase 50,000 shares with a $4.00 strike price vesting 90 days thereafter, and warrants to purchase 50,000 shares with a $5.00
strike price vesting 90 days thereafter). The warrants have a 3 year term and cashless option adjustable for stock splits.
On January 3, 2017, we
issued 150,000 shares of common stock, valued at $300,000 and warrants to purchase 50,000 shares of our common stock with a $3.00
strike price, expiring on December 30, 2019, for payment due pursuant to the terms of the Capital Market Access (CMA) Investor
Relations and Financial Consulting Services Agreement described above.
On January 3, 2017, in
connection with the CMA agreement discussed above, we issued 10,000 shares of common stock, valued at $20,000, for payment due
pursuant to the terms of a consulting agreement.
On January 5, 2017, we
entered into an employment agreement with an employee of the Company, whereby the employee agreed to provide management and financial/investor
relation services to the Company for a term of one year, cancellable by either party with 30 days prior written notice, in consideration
for $10,000 per month and the grant of warrants to purchase (a) 100,000 shares of the Company’s common stock, which will
vest and be exercisable at such time as the Company successfully up lists to the NYSE MKT or the NASDAQ Capital Market, and have
an exercise price of $3 per share and cashless exercise rights; (b) 50,000 shares of the Company’s common stock, which will
vest and be exercisable upon the earlier to occur of (i) the second year of the term of such warrants; (ii) when the institutional
ownership of the Company’s totals 10% or more of the Company’s outstanding common stock, and have an exercise price
of $4 per share and cashless exercise rights; and (c) 50,000 shares of the Company’s common stock, which will vest and be
exercisable upon the earlier to occur of (i) the second year of the term of such warrants; (ii) when the institutional ownership
of the Company’s totals 20% or more of the Company’s outstanding common stock, and have an exercise price of $5 per
share and cashless exercise rights, as well as certain other to be determined fees in the event the Company undertakes certain
transactions in the future. All of the warrants vest immediately in the event the Company is acquired and have a term through December
31, 2019.
On January 16, 2017, we
received $4,100 in proceeds and issued 3,280 shares of common stock in connection with the exercise of a warrant to purchase 3,280
shares of common stock with an exercise price of $1.25 per share.
On January 11, 2017, we
issued 256 shares of common stock, in connection with the exercise of a warrant with an exercise price of $1.25 per share, that
was granted for consulting services valued at $320.
On January 16, 2017, we
issued 10,000 shares of common stock, valued at $20,000, for payment due pursuant to the terms of a consulting agreement.
On January 26,
2017, the Company, Mr. Simon Orange, a director of the Company, and Charcoal Investments, Ltd., agreed to reduce the
exercise price of warrants to purchase 158,000 shares of common stock (the “Warrants”) previously issued by the
Company to Mr. Orange and Charcoal, to $2.00 per share and Mr. Orange and Charcoal Investments, Ltd. exercised all of the
Warrants and paid us an aggregate of $316,000, and we issued Mr. Orange 20,000 shares of restricted common stock and Charcoal
138,000 shares of restricted common stock, in connection with such exercise. In consideration for agreeing to exercise the
Warrants, the Company granted Mr. Orange warrants to purchase 20,000 shares of the Company’s common stock and Charcoal
warrants to purchase 138,000 shares of common stock, each with an exercise price of $2.00 per share and an expiration date of
January 25, 2020.
From February 6, 2017
to March 10, 2017, we raised $1,550,000 from the sale of 775,000 units, each consisting of one share of common stock and one warrant
to purchase one share of common stock (the “Units”), to fourteen accredited investors in a private offering, at $2
per Unit. Investors in the offering included an entity owned by Donald P. Monaco, the Company’s director (100,000 Units for
$200,000), and Robert J. Post, the Company’s director (50,000 Units for $100,000). The warrants have an exercise price of
$2.00 per share and a term of three years, and include no cashless exercise rights.
Employees
We employed 9 full-time
employees at February 28, 2017. Additionally, we use independent contractors and temporary personnel to supplement our workforce,
particularly in the development and technology tasks. Our employees are not represented by a labor union and we consider our employee
relations to be good. Competition for qualified personnel in our industry has historically been intense, particularly for software
engineers, developers and other technical staff.
Segments
We operate as one operating
segment consisting of products and services related to our online marketplace of travel and logistics services. For a discussion
of revenue, net income and total assets, see Part II, Item 8 of this Annual Report on Form 10-K.
Our travel and logistics services are composed
of the following services:
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NextTrip.com is a travel portal whose primary focus is ALRs, which
includes vacation homes and unused timeshare properties. To reinforce its ALR offerings, NextTrip.com also provides travelers with
a vast array of activities available for entertainment while at their destinations which is the focus of Maupintour; and the ability
to obtain flights and car and hotel rentals through third party relationships.
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Maupintour is one of the oldest luxury tour companies
in North America serving travel agents around the world. Maupintour has over 65 years’ experience with creating tours and
activity-focused trips, from private tours of the Vatican to bicycling in the Alps to wine-tasting in Italy.
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A vacation home platform for vacation home rentals to be made available
to other distributors is being incorporated into NextTrip.com and once incorporated (which is planned to be completed in the next
few months, if not sooner), it will allow other travel distributors to have access to real-time on-line bookable ALRs and present
these products to their customers. This platform will present, through a proprietary API, a diverse portfolio of properties.
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A timeshare resort rental platform is also being
incorporated into NextTrip.com with the goal of expanding the traditional “alternative lodging” definition to include
higher-end resort units. This will allow consumers to search and book from hundreds of thousands of vacant timeshare units. This
vacant inventory is global with a large portion in 4 and 5 star hotels and resorts. Once incorporated into Nextrip.com, consumers
will be able to book resort properties, in real-time, at significant discounts and without fear of any timeshare Membership solicitation.
Additionally, the platform (which is planned to be completed in the next few months, if not sooner) will provide timeshare Property
Managers/Developers/Owners a complete management tool. This will allow them to add and edit their own properties, monitor inventory
bookings and rent properties that would have previously been vacant.
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A library of thousands of hours of travel footage
shot in over 30 countries around the world. There are in excess of 15,000 clips of hotels, resorts, cruise and destination activities
that are used in the creation of travel videos that are presented on NextTrip.com with search results.
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A distribution agreement
that allows us to position our content, at no cost to Monaker, on our formerly owned network (which was part of Next 1 Network,
Inc., which was sold on January 22, 2016). Distribution of content is in both the linear and VOD (video on demand) TV platforms
including Comcast affiliates, Dish Network, Verizon FIOS as well as the 126 million mobile devices on Verizon Wireless. The
distribution agreement provides, at no cost to the Company, up to 60 minutes a day of programming and/or advertising time through
30 second commercials and selective Travel programming into approximately 37 million households in the Caribbean, Canada and the
United States.
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A Travel Club, which is a membership platform
that gives members access to existing travel product lines including cruises, hotels and resorts, airfare, and car rental. The
Travel Club also has a comprehensive lineup of lifestyle offerings that include golf, skiing, wine clubs, high-end merchandise,
sports, concert and entertainment tickets, cosmetics, spa, and wellness programs. The Company distributes Vacation Club memberships
to other organizations such as real estate agents as a means to allow them to benefit their agents and customers and stay in contact
with them through promotions.
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Other Investments:
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NameYourFee.com is a next generation job
recruiting website that allows employers to specify the amount of commission they are willing to pay a recruiting firm for placing
candidates. On February 2, 2015, the Company entered into a joint venture agreement with Jasper Group Holdings, Inc. (“Jasper”)
and created a Florida limited liability company named Name Your Fee, LLC. On April 20, 2015, the Company entered into a Joint Venture
Agreement with Jasper to leverage its existing technology and develop www.NameYourFee.com which provides tools for employment agencies
to market their services. The Company’s ownership in the Joint Venture was 51% and Jasper’s was 49%. The Company and
Jasper were to share in capital contributions as well as participate in the net profits of Name Your Fee, LLC while Jasper operated
and ran the NameYourFee.com website. On May 15, 2015, the Company issued 100,000 shares of Series D Preferred Stock to Jasper at
a stated value of $5 per share for a total value of $500,000 in consideration for the Company’s interest. As stated in the
agreement, Monaker received a 51% and Jasper received a 49% capital interest of the outstanding equity of Name Your Fee, LLC. Additionally,
Jasper contributed $75,000 in proceeds as part of the agreement. The Company properly eliminated the value of the investment in
accordance with ASC Topic 810, Consolidation as of February 29, 2016. On May 16, 2016 the Company sold its interest in Name Your
Fee, LLC for $750,000 to Crystal Falls Investments, LLC and received a promissory note for the same amount; which is payable at
the rate of 20% of net commissions of Name Your Fee, LLC, if timely paid and accrues no interest if timely paid, is included in
notes receivables as of February 28, 2017 and matures on May 15, 2018, and is secured by the outstanding membership interests of
Name Your Fee, LLC.
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RealBiz Media Group, Inc. focuses on real estate
media advertising and is engaged in the business of providing digital media and marketing services for the real estate industry.
RealBiz generates revenue through real estate agent and broker services fees. Monaker maintains a significant interest (approximately
28%) in RealBiz Preferred Series A Stock and RealBiz Common Stock which have been written down to zero ($0) to reflect the
realizable value of this investment. The Company owns an approximately 27% interest in RealBiz as of February 28, 2017 which is
represented by 44,470,101 RealBiz Preferred Series A Shares and 10,359,890 shares of RealBiz common stock. In addition, the Company
is owed in excess of $11.2 million in funds as a net receivable balance due from RealBiz for amounts paid for the benefits and
services provided by Monaker on behalf of RealBiz. Both the shares and the net receivable have been written down to zero ($0) to
reflect the realizable value of this investment and asset. On November 16, 2016, RealBiz notified Monaker that the Board of Directors
of RealBiz voted to cancel and retire all issued and outstanding shares of RealBiz Preferred Stock and all but 1,341,533 shares
of common stock of RealBiz held by Monaker. RealBiz’s announced cancellation and retirement was without Monaker’s consent,
and done in violation of Delaware law, federal law and the terms of RealBiz’s preferred and common stock. On November 30,
2016, the Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs,
Inc. and American Stock Transfer & Trust Company, LLC Case No.: 16-24978-CIV-GRAHAM) for damages and injunctive and declaratory
relief, arising from RealBiz’s declared cancellation, retirement, and/or termination of certain securities. RealBiz notified
Monaker of its intent to unilaterally cancel, retire, and/or terminate its preferred and common stock held by Monaker. RealBiz’s
announced cancellation, retirement, and termination was without Monaker’s consent, and done in violation of Delaware law,
federal law and the terms of RealBiz’s preferred and common stock. In December 2016, RealBiz cancelled the 44,470,101 preferred
Series A shares and 10,359,892 common shares which were held by the Company in connection with an alleged over issuance of common
shares relating to the conversion of Monaker’s dual convertible preferred shares. In December 2016, the Company filed a lawsuit
against RealBiz in the 11th Circuit Federal Court seeking an injunction against RealBiz’s action to claw back the aforementioned
shares; the injunction was denied and the lawsuit is proceeding. Additionally, the Company seeks to reverse the clawback in its
entirety.
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The Company is actively working on creating
and/or expanding several key relationships with travel suppliers to allow it to distribute its ALR offerings. Currently, travel
revenues are principally generated by Maupintour. Maupintour’s revenue is generated from the sale of high-end escorted tours
and Flexible Independent Travel (FIT) tours as well as upscale clientele seeking customized trips. The Company estimates that its
target market for Maupintour represents less than 1% of all U.S. domestic leisure travelers. We believe that upscale travelers,
primarily discerning “Baby Boomers,” seek travel solutions rather than pre-packaged tours, and the Company has consistently
tried to cater to this niche marketplace, rather than compete on the lower end of the market.
The travel video platform is active on both NextTrip.com
and Maupintour.com and the number of travel clips available is increasing by incorporating much of our travel destinations footage
library as well as through content from tourism boards and key travel suppliers. Our videos platforms have calls-to-action that
we plan to push across web and mobile devices and as brand awareness is created through this media platform, we anticipate that
revenues should increase as well.
The Company’s target markets are a) those
consumers that prefer a “home away from home” experience when choosing their lodging preference (i.e., vacation homes)
and those that want affordable high-end resort accommodations (i.e., timeshare resort units); and b) established distribution channels
and portals that cater to those same consumers.
Essentially, the Company has identified its target
products in the alternative lodging and activities / tours niches. All remnants of its historical foray into the television media
and real estate sectors have been sold or abandoned to focus exclusively on the travel sector. The Company continues to serve its
existing travel clients through Maupintour and NextTrip.com.
Sources and Availability of Raw Materials
and the Names of Principal Suppliers
Our products do not require the consumption of
raw materials.
Dependence on One or a Few Customers
We do not depend on one or a few customers. As
we expand our business, we do not anticipate that we will depend on one or a few customers.
Government Regulation
Our operations are subject to and affected by various
government regulations, U.S. federal, state and local government authorities. These providers, distributors, etc. are also subject
to periodic renewal and ongoing regulatory requirements. The rules, regulations, policies and procedures affecting our businesses
are constantly subject to change. The following descriptions are summary in nature and do not purport to describe all present and
proposed laws and regulations affecting our businesses.
Regulation of the Internet
We operate several internet websites which we use
to distribute information about, and supplement our programs. Internet services are now subject to regulation in the United States
relating to the privacy and security of personally identifiable user information and acquisition of personal information from children
under the age of 13, including the federal Child Online Protection Act (COPA) and the federal Controlling the Assault of Non-Solicited
Pornography and Marketing Act (CAN-SPAM). In addition, a majority of states have enacted laws that impose data security and security
breach obligations. Additional federal and state laws and regulations may be adopted with respect to the Internet or other online
services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks,
access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. In addition,
to the extent we offer products and services to online consumers outside the United States, the laws and regulations of foreign
jurisdictions, including, without limitation, consumer protection, privacy, advertising, data retention, intellectual property,
and content limitations, may impose additional compliance obligations on us.
Other Regulations
We are also subject to various local, state and
federal regulations, including, without limitation, regulations promulgated by federal and state environmental, health and labor
agencies.
Item 1A. Risk Factors
In addition to the other information in this
Annual Report, readers should carefully consider the following important factors. These factors, among others, in some cases have
affected, and in the future could affect, our financial condition and results of operations and could cause our future results
to differ materially from those expressed or implied in any forward-looking statements that appear in this Annual Report or that
we have made or will make elsewhere.
Risks Related to Our Operations, Business
and Industry
We will need additional capital which may
not be available on commercially acceptable terms, if at all, which raises questions about our ability to continue as a going concern.
As of February 28, 2017, and February 29,
2016, the Company had an accumulated deficit of $100,659,632 and $93,562,357, respectively. The net loss for the year ended
February 28, 2017, amounted to $7,097,275 of which $1,779,820 is attributable to amortization of discontinued platforms,
$1,778,629 is attributable to investor relations and consultants and $653,588 is attributable to professional fees related to
RealBiz litigation. The travel operations generated a gross profit of $41,038 while the costs to develop and repair the
platforms and websites amounted to $244,484. Although additional development expenses are expected, we believe that the bulk
of the expenses have been incurred and the platforms / websites are expected to be operational between the second and third
quarter of the fiscal year ended February 28, 2018. The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern.
We have very limited financial resources. We currently
have a monthly cash requirement of approximately $300,000, exclusive of capital expenditures. We will need to raise substantial
additional capital to support the on-going operation and increased market penetration of our products and services including the
development of national advertising relationships, increases in operating costs resulting from additional staff and office space
until such time as we generate revenues sufficient to support our operations, if ever. We believe that in the aggregate, we could
require several millions of dollars to support and expand the marketing and development of our travel products and services, repay
debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space
and systems for managing our business, and cover other operating costs until our planned revenue streams from travel products are
fully-implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working capital
needs on acceptable terms, or at all, will negatively impact our business, financial condition and liquidity. As of February 28,
2017, we had approximately $3.0 million of current liabilities (similar to the $3 million of current liabilities as of February
29, 2016). We currently do not have the resources to satisfy these obligations, and our inability to do so could have a material
adverse effect on our business, our ability to continue as a going concern, and the value of our securities.
We have experienced liquidity issues due to, among
other reasons, our limited ability to raise adequate capital on acceptable terms. We have historically relied upon the issuance
of promissory notes that are convertible into shares of our common stock to fund our operations and have devoted significant efforts
to reduce that exposure (as previously noted, the liabilities have been reduced from $12.2 million as of February 28, 2015 to $3.0
million as of February 29, 2016). We anticipate that we will need to issue equity to fund our operations and continue to repay
our outstanding debt for the foreseeable future. If we are unable to achieve operational profitability or we are not successful
in securing other forms of financing, we will have to evaluate alternative actions to reduce our operating expenses and conserve
cash.
These conditions raise substantial doubt about
our ability to continue as a going concern for the next twelve months. The accompanying financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements
do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The financial statements included herein also include a going concern
footnote from our auditors.
In the event we are unable to raise adequate funding
in the future for our operations and to pay our outstanding debt obligations, we may be forced to scale back our business plan
and/or liquidate some or all of our assets (or our creditors may undertake a foreclosure of such assets in order to satisfy amounts
we owe to such creditors) or may be forced to seek bankruptcy protection, which could result in the value of our outstanding securities
declining in value or becoming worthless.
If we are unable
to attract and maintain a critical mass of alternative lodging rental (ALR ) listings and travelers, whether due to competition
or other factors, our marketplace will become less valuable to property owners and managers and to travelers, and it could significantly
decrease our ability to generate revenue and net income in the future.
We anticipate that moving
forward, most of our revenue will be generated when ALRs are booked by either customers to our website or, by customers to distributors
we provide ALRs to. Our revenue will be the difference between the funds received from our customers and distributors versus the
net amount owed to the property owner / manager at the time of booking. Accordingly, our success primarily depends on our ability
to attract owners, managers and travelers to NextTrip.com, Maupintour.com and to distributors we have provided ALRs to. If property
owners and managers choose not to market their ALRs through our websites, or instead list them with a competitor, we may be unable
to offer a sufficient supply and variety of ALRs to attract travelers to our websites. Similarly, our volume of new and renewal
listings may suffer if we are unable to attract travelers to our websites or, to the distributors we provide ALRs to. As a result
of any of these events, the perceived usefulness of our online marketplace and the relationships with distributors may decline,
and, consequently, it could significantly decrease our ability to generate revenue and net income in the future. As a result, the
value of our securities may decline in value or become worthless.
Currently pending or future litigation or
governmental proceedings could result in material adverse consequences, including judgments or settlements.
From time to time, we are involved in lawsuits,
regulatory inquiries and may be involved in governmental and other legal proceedings arising out of the ordinary course of our
business. Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities.
The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or resolutions
to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely
affecting our results of operations and liquidity.
Our business depends
substantially on property owners and managers renewing their listings.
Our business depends substantially
on property owners and managers renewing their listings. Significant declines in our listing renewals could harm our operating
results. Property owners and managers generally market their vacation rentals on our websites with no obligation to renew. We may
be unable to predict future listing renewal rates accurately, and our renewal rates may decline materially or fluctuate as a result
of a number of factors. These factors include property owners’ decisions to sell or to cease renting their properties, their
decisions to use the services of our competitors, or their dissatisfaction with our pricing, products, services or websites. Property
owners and managers may not establish or renew listings if we cannot generate a large number of travelers who book vacation rentals
through our marketplace and/or through our distributors. As a result our revenue may decline and our results of operations may
be negatively affected.
If distributors,
we provide ALRs to, are unable to drive customers to their websites and/or we are unable to drive visitors to our websites, from
search engines or otherwise, this could negatively impact transactions on the websites of our distributor websites as well as our
websites and consequently cause our revenue to decrease.
Many visitors find the
distributors and our websites by searching for vacation rental information through Internet search engines. A critical factor in
attracting visitors to our websites, and those of our distributors, is how prominently our distributors and we are displayed in
response to search queries. Accordingly, we utilize search engine marketing, or SEM, as a means to provide a significant portion
of our visitor acquisition. SEM includes both paid visitor acquisition (on a cost-per-click basis) and unpaid visitor acquisition,
which is often referred to as organic search.
One method we employ to
acquire visitors via organic search is commonly known as search engine optimization, or SEO. SEO involves developing our websites
in order to rank highly in relevant search queries. In addition to SEM and SEO, we may also utilize other forms of marketing to
drive visitors to our websites, including branded search, display advertising and email marketing.
The various search engine
providers, such as Google and Bing, employ proprietary algorithms and other methods for determining which websites are displayed
for a given search query and how highly websites rank. Search engine providers may change these methods in a way that may negatively
affect the number of visitors to our distributors’ websites as well as our own websites and may do so without public announcement
or detailed explanation. Therefore, the success of our SEO and SEM strategy depends, in part, on our ability to anticipate and
respond to such changes in a timely and effective manner.
In addition, websites
must comply with search engine guidelines and policies. These guidelines and policies are complex and may change at any time. If
we or our distributors fail to follow such guidelines and policies properly, the search engine may cause our content to rank lower
in search results or could remove the content altogether. If we or our distributors fail to understand and comply with these guidelines
and policies and ensure our websites’ compliance, our SEO and SEM strategy may not be successful.
If our distributors or
if we are listed less prominently or fail to appear in search result listings for any reason, including as a result of our failure
to successfully execute our SEO and SEM strategy, it is likely that we will acquire fewer visitors to our websites. Fewer visitors
to our websites could lead to property owners and managers becoming dissatisfied with our websites, as well as fewer travelers
inquiring and booking through our websites, either or both of which could adversely impact our revenue. We may not be able to replace
this traffic in a cost-effective manner from other channels, such as cost-per-click SEM or display or other advertising, or even
at all. Any attempt to replace this traffic through other channels may increase our sales and marketing expenditures, which could
adversely affect our operating results.
Unfavorable changes
in, or interpretations of, government regulations or taxation of the evolving alternative lodging rental (ALR), Internet and e-commerce
industries could harm our operating results.
We have ALRs in markets
throughout the world, in jurisdictions which have various regulatory and taxation requirements that can affect our operations or
regulate the rental activity of property owners and managers.
Compliance with laws and
regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region has
different regulations with respect to licensing and other requirements for alternative lodging rental (ALR). Our online marketplace
is accessible by property owners, managers and travelers in many states and foreign jurisdictions. Our efficiencies and economies
of scale depend on generally uniform treatment of property owners, managers and travelers across all jurisdictions. Compliance
requirements that vary significantly from jurisdiction to jurisdiction impose added costs and increased liabilities for compliance
deficiencies. In addition, laws or regulations that may harm our business could be adopted, or interpreted in a manner that affects
our activities, including but not limited to the regulation of personal and consumer information and real estate licensing requirements.
Violations or new interpretations of these laws or regulations may result in penalties, negatively impact our operations and damage
our reputation and business.
In addition, regulatory
developments may affect the alternative lodging rental (ALR) industry and the ability of companies like us to list those vacation
rentals online. For example, some municipalities have adopted ordinances that limit the ability of property owners and managers
to rent certain properties for fewer than 30 consecutive days and other cities may introduce similar regulations. Some cities also
have fair housing or other laws governing whether and how properties may be rented, which they assert apply to ALR. Many homeowners,
condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition,
many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were established
before the growth of the Internet and e-commerce, which creates a risk of these laws being used, in ways not originally intended,
that could burden property owners and managers or otherwise harm our business. These and other similar new and newly interpreted
regulations could increase costs for, or otherwise discourage, owners and managers from listing their property with us, which could
harm our business and operating results.
From time to time, we
may become involved in challenges to, or disputes with government agencies regarding, these regulations. We may not be successful
in defending against the application of these laws and regulations. Further, if we were required to comply with regulations and
government requests that negatively impact our relations with property owners, managers and travelers, our business, operations
and financial results could be adversely impacted.
Additionally, new, changed,
or newly interpreted or applied tax laws, statutes, rules, regulations or ordinances could increase our property owners’
and managers’ and our compliance, operating and other costs. This, in turn, could deter property owners and managers from
renting their ALR properties, negatively affect our new listings and renewals, or increase costs of doing business. Any or all
of these events could adversely impact our business and financial performance.
Furthermore, as we expand
or change the products and services that we offer or the methods by which we offer them, we may become subject to additional legal
regulations, tax requirements or other risks. Regulators may seek to impose regulations and requirements on us even if we utilize
third parties to offer the products or services. These regulations and requirements may apply to payment processing, insurance
products or the various other products and services we may now or in the future offer or facilitate through our marketplace. Whether
we comply with or challenge these additional regulations, our costs may increase and our business may otherwise be harmed.
If we are not able
to maintain and enhance our NextTrip brand and the brands associated with each of our websites, our reputation and business may
suffer.
It is important for us
to maintain and enhance our brand identity in order to attract and retain property owners, managers, distributors and travelers.
The successful promotion of our brands will depend largely on our marketing and public relations efforts. We expect that the promotion
of our brands will require us to make substantial investments, and, as our market becomes more competitive, these branding initiatives
may become increasingly difficult and expensive. In addition, we may not be able to successfully build our NextTrip brand identity
without losing value associated with, or decreasing the effectiveness of, our other brand identities. If we do not successfully
maintain and enhance our brands, we could lose traveler traffic, which could, in turn, cause property owners and managers to terminate
or elect not to renew their listings with us. In addition, our brand promotion activities may not be successful or may not yield
revenue sufficient to offset their cost, which could adversely affect our reputation and business.
Our long-term success
depends, in part, on our ability to expand our property owner, manager and traveler bases outside of the United States and, as
a result, our business is susceptible to risks associated with international operations.
We have limited operating
and e-commerce experience in many foreign jurisdictions and are making significant investments to build our international operations.
We plan to continue our efforts to expand globally, including acquiring international businesses and conducting business in jurisdictions
where we do not currently operate. Managing a global organization is difficult, time consuming and expensive and any international
expansion efforts that we undertake may not be profitable in the near or long term or otherwise be successful. In addition, conducting
international operations subjects us to risks that include:
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the cost and resources required to localize our services, which requires the translation of our websites and their adaptation for local practices and legal and regulatory requirements;
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adjusting the products and services we provide in foreign jurisdictions, as needed, to better address the needs of local owners, managers, distributors and travelers, and the threats of local competitors;
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being subject to foreign laws and regulations, including those laws governing Internet activities, email messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices, which may be less developed, less predictable, more restrictive, and less familiar, and which may adversely affect financial results in certain regions;
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competition with companies that understand the local market better than we do or who have pre-existing relationships with property owners, managers, distributors and travelers in those markets;
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legal uncertainty regarding our liability for the transactions and content on our websites, including online bookings, property listings and other content provided by property owners and managers, including uncertainty resulting from unique local laws or a lack of clear precedent of applicable law;
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lack of familiarity with and the burden of complying with a wide variety of other foreign laws, legal standards and foreign regulatory requirements, including invoicing, data collection and storage, financial reporting and tax compliance requirements, which are subject to unexpected changes;
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laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses;
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challenges associated with joint venture relationships and minority investments;
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adapting to variations in foreign payment forms;
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difficulties in managing and staffing international operations and establishing or maintaining operational efficiencies;
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difficulties in establishing and maintaining adequate internal controls and security over our data and systems;
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currency exchange restrictions and fluctuations in currency exchange rates;
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potentially adverse tax consequences, which may be difficult to predict, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings;
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increased financial accounting and reporting burdens and complexities and difficulties in implementing and maintaining adequate internal controls;
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political, social and economic instability abroad, war, terrorist attacks and security concerns in general;
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the potential failure of financial institutions internationally;
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reduced or varied protection for intellectual property rights in some countries; and
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higher telecommunications and Internet service provider costs.
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Operating in international
markets also requires significant management attention and financial resources. We cannot guarantee that our international expansion
efforts in any or multiple territories will be successful. The investment and additional resources required to establish operations
and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased
costs.
The market in which
we participate is highly competitive, and we may be unable to compete successfully with our current or future competitors.
The market to provide
listing, search and marketing services for the alternative lodging rental (ALR) industry is very competitive and highly fragmented.
In addition, the barriers to entry are low and new competitors may enter. All of the services that we provide to property owners,
managers and travelers, including listing and search, are provided separately or in combination by current or potential competitors.
Our competitors may adopt aspects of our business model, which could reduce our ability to differentiate our services. Additionally,
current or new competitors may introduce new business models or services that we may need to adopt or otherwise adapt to in order
to compete, which could reduce our ability to differentiate our business or services from those of our competitors. Furthermore,
properties in the ALR industry are not typically marketed exclusively through any single channel, and our listing agreements are
not typically exclusive. Accordingly, our competitors could aggregate a set of listings similar to ours. Increased competition
could result in a reduction in revenue, rate of new listing acquisition, existing listings or market share.
There are thousands of
vacation rental listing websites that compete directly with us for listings, travelers, or both, such as HouseTrips.com, Booking.com,
HomeAway.com, Airbnb, @Leisure, InterHome, TripAdvisor and Wyndham Worldwide. Many of these competitors offer free or heavily discounted
listings or focus on a particular geographic location or a specific type of rental property. Some of them also aggregate property
listings obtained through various sources, including the websites of property managers some of whom also market their properties
on our websites.
Competitors also operate
websites directed at the wider fragmented travel lodging market, such as Airbnb, HomeAway and Wimdu, by listing either rooms or
the owner’s primary home. These properties increase both the number of rental opportunities available to travelers and the
competition for the attention of the traveler. Some vacation rental property owners and managers also list on these websites, and
consequently these companies currently compete with us to some extent.
We also compete with online
travel agency websites, such as Expedia, Hotels.com, Kayak, Priceline, Booking.com, Orbitz and Travelocity, which have traditionally
provided comprehensive travel services and some of whom are now expanding into the vacation rental category. We also compete with
large Internet search companies, such as craigslist, eBay, Google, MSN.com and Yahoo!, which provide listing or advertising services
in addition to a wide variety of other products or services. In addition, some competitors, such as Perfect Places, Inc., Atraveo
and eDomizil, predominately serve the professional property manager marketplace, and therefore have the ability to create more
products and features targeted to property managers. Hotels, corporate travel providers, travel metasearch engines, travel content
aggregators, mobile platform travel applications, social media websites, and even mobile computing hardware providers all also
have the potential to increase their competitive presence in the areas of our business as well.
We believe we will compete
primarily on the basis of the quantity and quality of our listings, the quality of the direct relationships we have with distributors,
property owners and managers, the volume of expected travelers who will visit our websites, the global diversity of the vacation
rentals available on our websites, the quality of our websites, the tools provided to our distributors, property owners and managers
to assist them with their business, customer service, brand identity, the success of our marketing programs, and price. If current
or potential property owners, managers, distributors or travelers choose to use any of these competitive offerings in lieu of ours,
our revenue could decrease and we could be required to make additional expenditures to compete more effectively. Any of these events
or results could harm our business, operating results and financial condition.
In addition, most of our
current or potential competitors are larger and have more resources than we do. Many of our current and potential competitors enjoy
substantial competitive advantages, such as greater name recognition in their markets, longer operating histories and larger marketing
budgets, as well as substantially greater financial, technical and other resources. In addition, our current or potential competitors
may have access to larger property owner, manager or traveler bases. As a result, our competitors may be able to respond more quickly
and effectively than we can to new or changing opportunities, technologies, standards or owner, manager or traveler requirements.
Furthermore, because of these advantages, existing and potential owners, managers, distributors and travelers might accept our
competitors’ offerings, even if they may be inferior to ours. For all of these reasons, we may not be able to compete successfully
against our current and future competitors.
If the businesses
and/or assets that we have acquired or invested in do not perform as expected or we are unable to effectively integrate acquired
businesses, our operating results and prospects could be harmed.
We have six platforms, a library of over 16,000
hours of travel footage and a YouTube Channel, and currently have an equity investment in RealBiz Media Group, Inc. The businesses
we have acquired, or invested in, may not perform as well as we expect. Failure to manage and successfully integrate recently acquired
businesses and technologies could harm our operating results and our prospects. If the companies we have invested in do not perform
well, our investments could become impaired and our financial results could be negatively impacted.
Our mergers and acquisitions
involve numerous risks, including the following:
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difficulties in integrating and managing the combined operations, technologies, technology platforms and products of the acquired companies and realizing the anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical or financial problems;
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legal or regulatory challenges or post-acquisition litigation, which could result in significant costs or require changes to the businesses or unwinding of the transaction;
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failure of the acquired company or assets to achieve anticipated revenue, earnings or cash flow;
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diversion of management’s attention or other resources from our existing business;
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our inability to maintain key distributors and business relationships, and the reputations of acquired businesses;
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uncertainty resulting from entering markets in which we have limited or no prior experience or in which competitors have stronger market positions;
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our dependence on unfamiliar affiliates and partners of acquired businesses;
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unanticipated costs associated with pursuing acquisitions;
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liabilities of acquired businesses, which may not be disclosed to us or which may exceed our estimates, including liabilities relating to non-compliance with applicable laws and regulations, such as data protection and privacy controls;
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difficulties in assigning or transferring to us or our subsidiaries intellectual property licensed to companies we acquired;
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difficulties in maintaining our internal standards, controls, procedures and policies including financial reporting requirements of the Sarbanes-Oxley Act of 2002 and extending these controls to acquired companies;
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potential loss of key employees of the acquired companies;
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difficulties in complying with antitrust and other government regulations;
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challenges in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements in accordance with U.S. generally accepted accounting principles; and
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potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, customer relationships or intellectual property, are later determined to be impaired and written down in value.
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Moreover, we rely heavily
on the representations and warranties provided to us by the sellers of acquired companies and assets, including as they relate
to creation, ownership and rights in intellectual property, existence of open source software and compliance with laws and contractual
requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result
in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due
to contractual time limitations and limitations of liability.
If we are unable
to introduce new or upgraded products, services or features that distributors, travelers or property owners and managers recognize
as valuable, we may fail to (i) drive additional travelers to the websites of our distributors, (ii) drive additional travelers
to our websites, (iii) retain existing property owners and managers, (iv) attract new property owners and managers, (v) retain
existing distributors, and/or (vi) attract new distributors. Our efforts to develop new and upgraded services and products could
require us to incur significant costs.
In order to continue to
attract travelers to (i) our distributors, as well as (ii) our own online marketplace while retaining, and attracting new, distributors,
property owners and managers, we will need to continue to invest in the development of new products, services and features that
both add value for travelers, distributors, property owners and managers and differentiate us from our competitors. The success
of new products, services and features depends on several factors, including the timely completion, introduction and market acceptance
of the product, service or feature. If travelers, distributors, property owners or managers do not recognize the value of our new
services or features, they may choose not to utilize our products or list on our online marketplace.
Attempting to develop
and deliver these new or upgraded products, services or features involves inherent hazards and difficulties, and is costly. Efforts
to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites have inherent risks,
and we may not be able to manage these product developments and enhancements successfully. We may not succeed in developing new
or upgraded products, services or features or new or upgraded products, services or features may not work as intended or provide
value. In addition, some new or upgraded products, services or features may be difficult for us to market and may also involve
unfavorable pricing. Even if we succeed, we cannot guarantee that our property owners and managers will respond favorably.
In addition to developing
our own improvements, we may choose to license or otherwise integrate applications, content and data from third parties. The introduction
of these improvements imposes costs on us and creates a risk that we may be unable to continue to access these technologies and
content on commercially reasonable terms, or at all. In the event we fail to develop new or upgraded products, services or features,
the demand for our services and ultimately our results of operations may be adversely affected.
We have a relatively
limited operating history and we operate in a rapidly evolving industry, which makes it difficult to evaluate our current business
and future prospects. If we fail to predict the manner in which our business will perform or how the market will develop, our business
and prospects may suffer materially.
Our limited operating
history, together with our rapidly changing industry, may make it difficult to evaluate our current business and our future prospects.
We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly
changing industries. These include challenges in accurate financial planning and forecasting as we develop new products or strategic
plans with little or no historical reference as a basis for such planning and forecasting. Our business and prospects should be
considered in light of the risks and difficulties we may encounter as a company operating in a highly competitive environment where
changes to our business, plans, and products may be required to respond to such changes.
In addition, the market
for online alternative lodging rental (ALR) is relatively new and, in many territories, is unproven with little data or research
available regarding the market and industry. It is uncertain whether the ALR market in many territories will continue to develop
or if our services will achieve and sustain a level of demand and market acceptance sufficient for us to generate revenue, net
income and cash flow growth, at anticipated levels or at all; we may need to focus on, or offer, different types of products and
services in order to remain competitive. Our success will depend, to a substantial extent, on the willingness of property owners
and managers to use commercial online rental property listing services. Some property managers have developed (and use) their own
proprietary online listing services and, therefore, may be reluctant or unwilling to use our services to market their properties.
Furthermore, some travelers and property owners and managers may be reluctant or unwilling to use online listing services because
of concerns regarding the security of data, the potential for fraudulent activity, including phishing, or the integrity of the
online marketplace. If property owners and managers do not perceive the benefits of marketing their properties online, then our
market may not develop as we expect, or it may develop more slowly than we expect, either of which could significantly harm our
business and operating results. Moreover, our success will depend on travelers use of our distributors, as well as our own, online
marketplace to search, locate and rent vacation rentals, which will depend on their willingness to use the Internet and their belief
in the integrity of the websites. In addition, since we operate in unproven and unstudied markets, we have limited insight into
trends that may develop in those markets and may affect our business. We may make errors in predicting and reacting to other relevant
business trends, which could harm our business.
Changes in our effective
tax rate could harm our future operating results.
We are subject to federal
and state income taxes in the United States and in various foreign jurisdictions. Our provision for income taxes and our effective
tax rate are subject to volatility and could be adversely affected by several circumstances, including:
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earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
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effects of certain non-tax deductible expenses;
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changes in the valuation of our deferred tax assets and liabilities;
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transfer pricing adjustments, including the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure;
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adverse outcomes resulting from any tax audit;
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our ability to utilize our net operating losses and other deferred tax assets; and
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changes in accounting principles or changes in tax laws and regulations, or the application of the tax laws and regulations, including possible U.S. changes to the deductibility of expenses attributable to foreign income, or the foreign tax credit rules.
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Significant judgment is
required in the application of accounting guidance relating to uncertainty in income taxes. If tax authorities challenge our tax
positions and any such challenges are settled unfavorably, it could adversely impact our provision for income taxes.
We are exposed to
fluctuations in currency exchange rates.
Because we plan to conduct
a significant portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse
movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations.
In addition, fluctuation in our mix of U.S. and foreign currency denominated transactions may contribute to this effect as exchange
rates vary. Moreover, as a result of these exchange rate fluctuations, revenue, cost of revenue, operating expenses and other operating
results may differ materially from expectations when translated from the local currency into U.S. dollars upon consolidation. For
example, if the U.S. dollar strengthens relative to foreign currencies our non-U.S. revenue would be adversely affected when translated
into U.S. dollars. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue
when translated into U.S. dollars. We may enter into hedging arrangements in order to manage foreign currency exposure but such
activity may not completely eliminate fluctuations in our operating results.
Our business depends
on retaining and attracting capable management and operating personnel.
Our success depends in
large part on our ability to attract and retain high-quality management and operating personnel, as well as skilled technical and
marketing personnel, who are in high demand and are often subject to competing offers. Competition for qualified employees is intense
in our industry, and the loss of even a few qualified employees, or an inability to attract, retain and motivate additional highly
skilled employees required for the planned expansion of our business could harm our operating results and impair our ability to
grow. To attract and retain key personnel, we use various measures, including an equity incentive program and incentive bonuses
for executive officers and other key employees. While we attempt to provide additional or different incentive compensation tools
to mitigate this impact, the measures we employ to attract and maintain key personnel may not be effective enough to enable us
to attract and retain the personnel we require to operate our business effectively.
If we lose the services
of our key personnel, including William Kerby, our Chief Executive Officer, our business would be materially and adversely affected.
Furthermore, we do not have “key person” life insurance, and we do not presently intend to purchase such insurance,
on Mr. Kerby or any of our other key personnel. We believe that our success is substantially dependent upon: (1) our ability to
retain and motivate our senior management team and other key employees; and (2) our ability to identify, attract, hire, train,
retain and motivate other qualified personnel. The development of our business and operations is dependent upon the efforts and
talents of our executive officers, whose extensive experience and contacts within the industries in which we wish to compete are
a critical component of our business strategy. We may not be successful in retaining the services of any of the members of our
senior management team or other key personnel, or in hiring qualified technical, managerial, marketing and administrative personnel.
If we do not succeed in retaining our employees and in attracting new employees, our business could suffer significantly.
The employment agreements
of our officers include limited non-solicitation and non-compete provisions and provide for severance pay upon termination of such
agreements for certain reasons.
William Kerby entered into an employment agreement,
dated October 15, 2006 with an annual base salary of $300,000. He may also, as determined by the Board of Directors (or an authorized
committee thereof), receive a year-end performance bonus. The agreement has automatic renewal periods of four years each, and is
currently in place until October 14, 2018. In the event the agreement is terminated by the Company with notice of non-renewal,
the Company is required to pay Mr. Kerby all salary earned up until the date of termination, plus three months’ severance.
The Agreement is also terminated upon the death or disability (i.e., he is unable to perform duties for a period of 120 days out
of any 180 day period) of Mr. Kerby, and can be terminated by the Company for cause (gross negligence, willful misconduct, willful
nonfeasance, material breach, conviction following final disposition of any available appeal of a felony or pleading guilty to
or no contest to any felony) or without cause, and by Mr. Kerby for good reason (i.e., in the event the Company breaches any term
of the agreement) or for no reason. In the event Mr. Kerby’s employment is terminated due to Mr. Kerby’s death, the
Company is required to continue to pay his salary to his estate for a period of six months. In the event Mr. Kerby’s employment
is terminated due to Mr. Kerby’s disability, the Company is required to continue to pay Mr. Kerby’s salary for the
greater of two years or the period until disability insurance benefits furnished by the Company, if any, begin. In the event Mr.
Kerby terminates his employment for good reason or the Company terminates his employment without cause, the Company is required
to continue to pay Mr. Kerby’s salary and benefits for the remainder of the then term. In the event the Company terminates
his employment for cause, Mr. Kerby is due his salary through the termination date. The agreement includes non-solicitation and
non-competition clauses, prohibiting him from soliciting customers and clients of the Company or otherwise interfering with the
Company’s employees for a period of six months from the date of termination, and prohibiting him from competing against the
Company anywhere in the United States, for a period of three months from the date of termination, respectively, provided that the
non-competition provision is voided in the event of the non-renewal of the agreement, in the event Mr. Kerby terminates his employment
for good reason, in the event the Company terminates the agreement other than for cause, and certain other reasons described in
greater detail in the agreement.
Omar Jimenez, our Chief Financial Officer, entered
into an employment agreement, dated January 21, 2016, pursuant to which he received $175,000 per year until July 2016, when his
salary was increased to $250,000 per year, and he is eligible for cash or common stock bonuses at the discretion of the board of
directors. If the agreement is terminated by Mr. Jimenez for good reason (as defined in the agreement) or by the Company without
cause, and other than due to Mr. Jimenez’s death or disability, Mr. Jimenez is due two calendar months of severance pay;
if the agreement is terminated due to Mr. Jimenez’s disability, Mr. Jimenez, is due compensation through the remainder of
the month during which he was terminated. The agreement includes a one year non-solicitation and non-competition clause following
the date of the termination of the agreement, which non-competition clause prohibits him (without the prior written consent of
the Company which consent will not be unreasonably withheld) from directly or through another person or another entity carrying
on or being engaged in any business within North America which is competitive with the business of the Company, however the non-compete
shall terminate in the event of a termination of employment by Mr. Jimenez for good reason or a termination by the Company other
than for cause or disability.
The automatic renewal
feature of the agreements may prevent us from terminating the employment of such officers, the non-solicitation and non-compete
provisions may not provide us adequate protection from such persons competing with us after their termination, and the severance
pay payable to such individuals may make it costly to terminate the employment of such individuals, make us less attractive for
potential acquirers or prevent a change of control.
If we fail to protect
confidential information against security breaches, or if distributors, property owners, managers or travelers are reluctant to
use our online marketplace because of privacy or security concerns, we might face additional costs, and activity on our websites
could decline.
We collect and use personally
identifiable information of distributors, property owners, managers and travelers in the operation of our business. Our systems
may be vulnerable to computer viruses or physical or electronic break-ins that our security measures may not detect. Anyone that
is able to circumvent our security measures could misappropriate confidential or proprietary information, cause interruption in
our operations, damage our computers or those of our users, or otherwise damage our reputation and business. We may need to expend
significant resources to protect against security breaches or to address problems caused by breaches. Security breaches of our
systems, or even the systems of third parties we rely upon, such as credit card processors, could damage our reputation and expose
us to litigation and possible liability under various laws and regulations. In addition, industry-wide incidents, or incidents
specific to us, could deter people from using our distributors’, as well as, our online marketplaces. Concern among distributors,
property owners, managers and travelers regarding our use of personal information collected on our websites could keep them from
using, or continuing to use, our online marketplace.
There are risks of security
breaches both on our own systems and on third party systems which store our information as we increase the types of technology
we use to operate our marketplace, such as mobile applications. New and evolving technology systems and platforms may involve security
risks that are difficult to predict and adequately guard against. In addition, third parties that process credit card transactions
between us and property owners and managers maintain personal information collected from them. Such information could be stolen
or misappropriated, and we could be subject to liability as a result. Further, property owners and managers may develop a lack
of confidence in these third parties or in their ability to securely conduct credit card transactions on our distributors’
websites, our websites or the Internet in general, which could adversely impact our business, revenue and operating results. Our
property owners, managers and travelers may be harmed by such breaches and we may in turn be subject to costly litigation or regulatory
compliance costs, and harm to our reputation and brand. Moreover, some property owners, managers and travelers may cease using
our marketplace altogether.
The laws of some states
and countries require businesses that maintain personal information about their residents in electronic databases to implement
reasonable measures to keep that information secure. Our practice is to encrypt all sensitive information, but we do not know whether
our current practice will be challenged under these laws. In addition, under certain of these laws, if there is a breach of our
computer systems and we know or suspect that unencrypted personal data has been stolen, we are required to inform any user whose
data was stolen, which could harm our reputation and business. Complying with the applicable notice requirements in the event of
a security breach could result in significant costs. We may also be subject to contractual claims, investigation and penalties
by regulatory authorities, and claims by persons whose information was disclosed.
Compounding these legal
risks, many states and countries have enacted different and often contradictory requirements for protecting personal information
collected and maintained electronically. Compliance with these numerous and contradictory requirements of is particularly difficult
for us because we collect personal information from users in multiple jurisdictions. While we intend to comply fully with these
laws, failure to comply could result in legal liability, cause us to suffer adverse publicity and lose business, traffic and revenue.
If we were required to pay any significant amount of money in satisfaction of claims under these or similar laws, or if we were
forced to cease our business operations for any length of time as a result of our inability to comply fully, our business, operating
results and financial condition could be adversely affected.
In addition, third parties
may target users of our websites directly with attempts to breach the security of their email accounts or management systems, such
as through phishing attacks, which are fraudulent identity theft schemes designed to appear as legitimate emails from us or from
our property owners and managers. Criminals may also employ other schemes aimed at defrauding our property owners, managers or
travelers in ways that we may not anticipate or be able to adequately guard against. Although phishing attacks and other fraud
schemes are generally not carried out through our systems, victims may nevertheless seek recovery from us. As a result, we may
be required to defend ourselves in costly litigation and may suffer harm to our reputation, brand and business.
In the event any of the
above risks were to occur our reputation could be harmed, we and/or our distributors could lose either website traffic or users
and as a result, our results of operations and the value of our securities could be adversely affected.
If we are unable
to adapt to changes in technology, our business could be harmed.
Because property owners,
managers and travelers can access our websites using a variety of hardware and software platforms, we will need to continuously
modify and enhance our service to keep pace with related technological changes. We may not be successful in developing necessary,
functional and popular modifications and enhancements. Furthermore, uncertainties about the timing and nature of these necessary
changes could result in unplanned research and development expenses. In addition, any failure of our online marketplace to operate
effectively with future technologies could result in dissatisfaction from travelers, distributors, property owners, and managers,
any of which could harm our business.
We may be subject
to liability for the activities of our property owners and managers, which could harm our reputation and increase our operating
costs.
We periodically receive
complaints related to certain activities on our websites, including disputes over the authenticity of an ALR listing. We may be
subject to claims of liability for unauthorized use of credit card and/or bank account information, identity theft, phishing attacks,
potential breaches of system security, libel, and infringement of third-party copyrights, trademarks or other intellectual property
rights. We have experienced fraud by purported owners or managers listing properties which either do not exist or are significantly
not as described in the listing. The methods used by perpetrators of fraud constantly evolve and are complex. Moreover, our trust
and security measures may not detect all fraudulent activity. Consequently, we expect to receive complaints from travelers and
requests for reimbursement of their rental fees, as well as actual or threatened related legal action against us in the usual course
of business.
We may also be subject
to claims of liability based on events that occur during travelers’ stays at ALRs, including those related to robbery, injury,
death, and other similar incidents. These types of claims could increase our operating costs and adversely affect our business
and results of operations, even if these claims do not result in liability, as we incur costs related to investigation and defense.
The available terms and conditions of our websites specifically state that we are exempt from any liability to travelers relating
to these matters. However, the enforceability of these terms varies from jurisdiction to jurisdiction, and the laws in this area
are consistently evolving. If we are subject to liability or claims of liability relating to the acts of our property owners or
managers, or due to fraudulent listings, we may be subject to negative publicity, incur additional expenses and be subject to liability,
any of which could harm our business and our operating results.
Loss or material
modification of our credit card acceptance privileges could have a material adverse effect on our business and operating results.
Credit card acceptance privileges involve additional potential costs relating to reimbursements and fraud.
The loss of our credit
card acceptance privileges could significantly limit the availability and desirability of our products and services. Moreover,
if we fail to fully perform our contractual obligations we could be obligated to reimburse credit card companies for refunded payments
that have been contested by the cardholders. In addition, even when we are in compliance with these obligations, we bear other
expenses including those related to the acceptance of fraudulent credit cards. As a result of all of these risks, credit card companies
may require us to set aside additional cash reserves, may increase the transaction fees they charge us, or may even refuse to renew
our acceptance privileges.
In addition, credit card
networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants who process
and accept credit cards and include the Payment Card Industry Data Security Standards, or the PCI DSS. Under these rules, we are
required to adopt and implement internal controls over the use, storage and security of card data. We assess our compliance with
the PCI DSS rules on a periodic basis and make necessary improvements to our internal controls. Failure to comply may subject us
to fines, penalties, damages and civil liability and could prevent us from processing or accepting credit cards. However, we cannot
guarantee that compliance with these rules will prevent illegal or improper use of our payments systems or the theft, loss or misuse
of the credit card data.
The loss of, or the significant
modification of, the terms under which we obtain credit card acceptance privileges could have a material adverse effect on our
business, revenue and operating results.
Our revenue, expenses
and operating results could be negatively affected by changes in travel, real estate and ALR markets, as well as general economic
conditions.
Our business is particularly
sensitive to trends in the travel, real estate and vacation rental markets, which are unpredictable, as well as trends in the general
economy. Therefore, our operating results, to the extent they reflect changes in the broader travel, real estate and vacation rental
industries, may be subject to significant fluctuations. For example, changes in the travel industry, such as disruptions caused
by war, terrorist attacks, natural disasters, weather bankruptcies or diseases could significantly reduce the willingness of potential
travelers to plan vacation and other travel. Such disruptions that harm or destroy vacation homes could cause the property owners
and managers of such homes to cancel or fail to renew their listings. Downturns in real estate markets may result in decreased
new building rates and increases in foreclosures, which could also result in fewer vacation rentals available for listing. Also,
since vacation travel is generally dependent on discretionary spending, negative general economic conditions could significantly
reduce the overall amount that travelers spend on vacation travel.
Additionally, property
owners may choose or be forced to sell their vacation rentals during periods of economic slowdown or recession. Any or all of these
factors could reduce the demand for vacation rentals and our services, thereby reducing our revenue. This in turn could increase
our need to make significant expenditures to continue to attract distributors, property owners, managers and travelers to our websites.
Vacation rentals
are often located in popular vacation destinations around the world and utilized on a seasonal basis. Factors influencing the desirability
of vacation rentals in a particular region or season could adversely affect our ability to obtain new listings and retain existing
listings.
ALRs are often located
in popular vacation destinations and utilized on a seasonal basis. As a result, our listings involve properties that are often
concentrated in particular regions, and our revenue is dependent upon our ability (or willingness) to list properties in those
regions. If we became unable (or unwilling) to list properties in a particular region, our listings in the region could decline
or cease to grow, and revenue and results of operations could be adversely impacted.
In addition, factors influencing
the desirability of ALRs in a particular region or during a specific season could adversely affect our ability to obtain new listings
and retain existing listings. A significant natural disaster, political turmoil or other regional disturbance could reduce the
number of available vacation rentals in that area, reducing our listing base and our revenue. In addition, if we do not have sufficient
property listings in a newly popular vacation destination, we could fail to attract travelers; consequently, property owners and
managers may opt to list their properties with a competitor having a greater presence in that area.
We could face liability
for transactions and information on (or accessible through) our or, our distributors’, online marketplaces.
A significant portion
of the information available through our and our distributors’ online marketplaces is submitted by property owners and managers
and third parties. Property owners and managers could assert that information concerning them on our websites contains errors or
omissions and third parties could seek damages from us for losses incurred if they rely upon such incorrect information. We could
also be subject to claims that such information is defamatory, libelous, or infringes on third-party copyrights and privacy and
publicity rights. We might be subject to claims that by providing links to third party websites, we are liable for wrongful actions
by those third parties. Even if these claims do not result in liability to us, we could incur significant costs in investigating
and defending against these claims.
In addition, our services
feature a property review platform, which allows travelers to post property reviews and other information about properties, property
owners and managers. Although this feedback is generated by users and not by us, claims of libel, defamation or other injury have
been made against other Internet service providers offering similar forums and may be made against us for content posted in this
forum. Our potential liability for this information could require us to expend substantial resources to reduce our liability exposure
and may limit the attractiveness of our and our distributors’ online marketplace. Moreover, our general liability insurance
may not cover all potential claims to which we are exposed and may not be adequate to indemnify us for all liability that may be
imposed and as a result we could face significant liability for such claims which could have a material adverse effect on our cash
flows.
Property owner,
distributor, manager or traveler complaints or negative publicity about our company, our services or our business activities could
diminish use of our online marketplace and our brand.
Property owner, distributor,
manager or traveler complaints or negative publicity about our company, our services or our business activities could severely
diminish consumer confidence in and use of our online marketplace and negatively affect our brand. Our measures to combat risks
of fraud and breaches of privacy and security can damage relations with our property owners and managers, for instance when we
remove listings which have repeatedly been reported as misleadingly described. These measures heighten the need for prompt and
accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense,
and this expense, if not managed properly, could significantly impact our profitability. Failure to manage or train our customer
service representatives properly could compromise our ability to handle property owner, manager and traveler complaints effectively.
If we do not handle these complaints effectively, our reputation may suffer, and we may lose the confidence of property owners,
distributors, managers and travelers. We may also be the subject of blog or forum postings that include inaccurate statements and
create negative publicity. As a result of these complaints or negative publicity, property owners, distributors and managers may
discontinue their listing or services with us or travelers may discontinue their use of our websites, and our business, brand and
results of operations could be adversely impacted.
If we do not adequately
protect our intellectual property, our ability to compete could be impaired.
Our intellectual property
includes the content of our websites, registered domain names, as well as registered and unregistered trademarks. We believe that
our intellectual property is an essential asset of our business and that our domain names and our technology infrastructure currently
give us a competitive advantage in the online market for ALR listings. If we do not adequately protect our intellectual property,
our brand, reputation and perceived content value could be harmed, resulting in an impaired ability to compete effectively.
To protect our intellectual
property we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions and our user policy
and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly take action
we deem appropriate to protect our rights. We also enter into confidentiality agreements with our employees and consultants and
seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have
taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible
for other parties to copy or otherwise obtain and use the content of our websites without authorization. We may be unable to prevent
competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names,
service marks and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property
rights, litigation may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming, expensive,
distracting and result in unfavorable outcomes. A failure to protect our intellectual property in a cost-effective and meaningful
manner could have a material adverse effect on our ability to compete.
Effective trademark, copyright
and trade secret protection may not be available in every country in which our products are available over the Internet. In addition,
the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain
and still evolving.
We may be subject
to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to
pay significant damages and limit our ability to operate.
Companies in the Internet
and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of
licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on
allegations of infringement or other violations of intellectual property rights. There may be intellectual property rights held
by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding
or business methods. Any intellectual property claim against us, regardless of merit, could be time-consuming and expensive to
settle or litigate and could divert our management’s attention and other resources. These claims also could subject us to
significant liability for damages and could result in our having to stop using technology, content, branding or business methods
found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual
property held by others, which may not be available on commercially reasonable terms, or at all. If we cannot license or develop
technology, content, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete
effectively. Even if a license is available, we could be required to pay significant royalties, which could increase our operating
expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which
could require significant effort and expense and be inferior. Any of these results could harm our operating results.
We currently rely
on a small number of third-party service providers to host and deliver a significant portion of our services, and any interruptions
or delays in services from these third parties could impair the delivery of our services and harm our business.
We rely on third-party
service providers for numerous products and services, including payment processing services, data center services, web hosting
services, insurance products for customers and travelers and some customer service functions. We rely on these companies to provide
uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.
We use a combination of
third-party data centers to host our websites and core services. We do not control the operation of any of the third-party data
center facilities we use. These facilities may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage,
acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications
failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster
recovery plan in place nor do our systems provide complete redundancy of data storage or processing. As a result, the occurrence
of any of these events, a decision by our third-party service providers to close their data center facilities without adequate
notice or other unanticipated problems could result in loss of data as well as a significant interruption in our services and harm
to our reputation and brand. Additionally, our third-party data center facility agreements are of limited durations, and our third-party
data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we
are unable to renew our agreements with these facilities on commercially reasonable terms, we may experience delays in the provisioning
of our services until an agreement with another data center facility can be arranged. This shift to alternate data centers could
take more than 24 hours depending on the nature of the event.
Furthermore, we depend
on continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose
the services of one or more of our bandwidth providers for any reason or if their services are disrupted, we could experience disruption
in our services or we could be required to retain the services of a replacement bandwidth provider, which could harm our business
and reputation.
Our operations are dependent
on the availability of electricity, which also comes from third-party providers. If we or the third-party data center facilities
that we use to deliver our services were to experience a major power outage, it could result in disruption of our services and
harm to our business.
If these companies experience
difficulties and are not able to provide services in a reliable and secure manner, if they do not operate in compliance with applicable
laws, rules and regulations and, with respect to payment and card processing companies, if they are unable to effectively combat
the use of fraudulent payments on our websites, our results of operations and financial positions could be materially and adversely
affected. In addition, if such third-party service providers were to cease operations or face other business disruption either
temporarily or permanently, or otherwise face serious performance problems, we could suffer increased costs and delays until we
find or develop an equivalent replacement, any of which could have an adverse impact on our business and financial performance.
Our processing,
storage, use and disclosure of personal data will expose us to risks of internal or external security breaches and could give rise
to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
The security of data when
engaging in electronic commerce is essential in maintaining consumer and supplier confidence in our services. Substantial or ongoing
security breaches whether instigated internally or externally on our systems or other internet based systems could significantly
harm our future business. It is possible that advances in computer circumvention capabilities, new discoveries or other developments,
including our own acts or omissions, could result in a compromise or breach of customer transaction data.
We cannot guarantee that
our security measures will prevent security breaches or attacks. A party (whether internal, external, an affiliate or unrelated
third party) that is able to circumvent our security systems could steal customer information or transaction data, proprietary
information or cause significant interruptions in our operations. For instance, from time to time, companies have experienced “denial-of-service”
type attacks that have made portions of websites slow or unavailable for periods of time. We may need to expend significant
resources to protect against security breaches or to address problems caused by breaches, and reductions in website availability
and response time could cause loss of substantial business volumes during the occurrence of any such incident. Security breaches
could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject
us to regulatory penalties and sanctions. Security breaches could also cause customers and potential customers to lose confidence
in our security, which would have a negative effect on the value of our brand.
We also face risks associated
with security breaches affecting third parties conducting business over the Internet. Consumers generally are concerned with security
and privacy on the Internet, and any publicized security problems could inhibit the growth of the Internet and, therefore, our
services as a means of conducting commercial transactions. Additionally, security breaches at third parties such as supplier
or distributor systems upon which we may rely could result in negative publicity, damage our reputation, expose us to risk of loss
or litigation and possible liability and subject us to regulatory penalties and sanctions.
In our processing transactions,
we will receive and store a large volume of personally identifiable data. We could be adversely affected if legislation or
regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their
legislation or regulations in ways that negatively affect our business, results of operations and financial condition.
Our
websites may encounter technical problems and service interruptions.
Our
websites may in the future experience slower response times or interruptions as a result of increased traffic or other reasons.
These delays and interruptions resulting from failure to maintain Internet service connections to our site could frustrate visitors
and reduce our future web site traffic, which could have a material adverse effect on our business.
If we do not successfully
implement any acquisition strategies, our operating results and prospects could be harmed.
We face competition within
our industry for acquisitions of businesses, technologies and assets, and, in the future, such competition may become more intense.
As such, even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition
on commercially reasonable terms or at all because of such competition. Furthermore, if we enter into negotiations that are not
ultimately consummated, those negotiations could result in diversion of management time and significant out-of-pocket costs. Even
if we are able to complete such acquisitions, we may additionally expend significant amounts of cash or incur substantial debt
to finance them, which indebtedness could result in restrictions on our business and use of available cash. In addition, we may
finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which could result in dilution of
our existing stockholders. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize their benefits.
If we are unable to successfully address any of these risks, our business, financial condition or operating results could be harmed.
Our failure to maintain
effective internal controls could adversely affect our financial position and lower our stock price.
We are subject to reporting
and other obligations under the Exchange Act, including the requirements of the Sarbanes-Oxley Act. These provisions require annual
management assessments of the effectiveness of our internal controls over financial reporting. We also operate in a complex environment
and expect these obligations, together with our rapid growth and expansion through acquisitions, to place significant demands on
our management and administrative resources, including accounting and tax resources. If we are unable to conclude that our internal
control over financial reporting is effective, our investors could lose confidence in the accuracy and completeness of our financial
reports.
We have identified a material weakness in
our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial
condition, cash flows and results of operations in a timely and accurate manner and/or increase the risk of future misstatements,
which could have a material adverse effect on our business, financial condition, cash flows and results of operations and could
cause the market value of our common shares and/or debt securities to decline.
Our management is responsible for establishing
and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Based
on reviews conducted by management, we have concluded that a material weakness in the Company’s internal controls over financial
report existed that contributed to the errors in accounting that necessitated the restatement of previously issued financial statements
for the year ended February 28, 2015. A material weakness is a deficiency, or a combination of deficiencies, in internal controls
over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.
The Company has identified certain remediation
actions and is in the process of implementing them, but such efforts are not complete and remain ongoing. If we do not complete
our remediation in a timely manner or if our remedial measures are insufficient to address the material weaknesses, or if additional
material weaknesses in our internal controls are discovered or occur in the future, it may materially adversely affect our ability
to report our financial condition and results of operations in a timely and accurate manner and there will continue to be an increased
risk of future misstatements. Although we regularly review and evaluate internal controls systems to allow management to report
on the effectiveness of our internal controls over financial reporting, we may discover additional weaknesses in our internal controls
over financial reporting or disclosure controls and procedures. The next time we evaluate our internal controls over financial
reporting and disclosure controls and procedures, if we identify one or more new material weaknesses or have been unable to timely
remediate our existing material weaknesses, we would be unable to conclude that our internal controls over financial reporting
or disclosure controls and procedures are effective. If we are unable to conclude that our internal controls over financial reporting
or our disclosure controls and procedures are effective, or if our independent registered public accounting firm expresses an opinion
that our internal controls over financial reporting is ineffective, we may not be able to report our financial condition and results
of operations in a timely and accurate manner, which could have a material adverse effect on our business, financial condition,
cash flows and results of operations and could cause the market value of our common shares to decline. In addition, any potential
future restatements could subject us to additional adverse consequences, including sanctions by the SEC, shareholder litigation
and other adverse actions. Moreover, we may be the subject of further negative publicity focusing on such financial statement adjustments
and resulting restatement and negative reactions from our shareholders, creditors or others with whom we do business. The occurrence
of any of the foregoing could have a material adverse effect on our business, financial condition, cash flows and results of operations
and could cause the market value of our common shares to decline.
Shareholders may be diluted significantly
through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.
Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will
consist of restricted shares of our common stock or where shares are to be issued to our officers, directors and applicable consultants,
free trading shares pursuant to Form S-8 registration statements. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares of common stock. In addition, we may attempt to
raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of
the ownership interests of existing shareholders, which may further dilute common stock book value, and that dilution may be material.
Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares
may be issued to parties or entities committed to supporting existing management.
We have significant
indebtedness, which could adversely affect our business and financial condition.
As of February 28, 2017,
the aggregate face value of our outstanding convertible senior promissory notes was $1.4 million and draws on a line of credit
amounted to $1.193 million. Risks relating to our indebtedness include:
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increasing our vulnerability to general adverse economic and industry conditions;
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requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;
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making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
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limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;
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possibly placing us at a competitive disadvantage compared to our competitors that have less debt;
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applying the accounting method for convertible debt securities that may be settled in cash, which requires the notes’ equity component to be included in the paid-in capital section of stockholders’ equity and the value of the equity component to be treated as a debt discount. The amortization of this discount will result in lower reported net income which in turn could adversely affect our reported financial results;
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limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable; and
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responding to the conditional conversion feature of the notes, which if triggered could adversely affect our liquidity if we elect to satisfy our conversion obligation through the payment of cash.
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William Kerby (our CEO and Chairman) and
Donald P. Monaco (our Director), together own approximately 95.3% of our voting securities which gives them significant influence
over the affairs of our Company.
William Kerby (CEO and Chairman) and Donald P.
Monaco (Director), collectively control approximately 95.3% of our voting securities which gives them significant voting control
over our Company. Mr. Kerby owns 794,611 shares of Series A Preferred Stock (694,611 directly and 100,000 beneficially which are
convertible into 1,589,222 shares of common stock) and 100,847 shares of common stock and Mr. Monaco beneficially owns 1,075,000
shares of Series A Preferred Stock (convertible into 2,150,000 shares of common stock) and 1,712,066 beneficially owned shares
of common stock. Each share of Series A Preferred Stock provides the holder thereof 100 votes on stockholder matters. As a result,
Messrs. Kerby and Monaco collectively control approximately 95.3% of our voting securities, thereby giving them significant influence
in electing our directors and appointing management, possibly delaying or preventing mergers or deals and suppressing the value
of our common stock.
Because we are a small company, the requirements
of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of
the Sarbanes-Oxley Act and the Dodd-Frank Act, may strain our resources, increase our costs and distract management, and we may
be unable to comply with these requirements in a timely or cost-effective manner.
As a public company with listed equity securities,
we must comply with the federal securities laws, rules and regulations, including certain corporate governance provisions of the
Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act and the Dodd-Frank Act, related rules and regulations of the SEC, with which
a private company is not required to comply. Complying with these laws, rules and regulations will occupy a significant amount
of time of our directors and management and will significantly increase our costs and expenses, which we cannot estimate accurately
at this time. Among other things, we must:
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establish and maintain a system of internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
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prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;
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maintain various internal compliance and disclosures policies, such as those relating to disclosure controls and procedures and insider trading in our common stock;
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involve and retain to a greater degree outside counsel and accountants in the above activities;
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maintain a comprehensive internal audit function; and
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maintain an investor relations function.
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In addition, being a public company subject to
these rules and regulations may require us to accept less director and officer liability insurance coverage than we desire or to
incur substantial costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified
members of our Board of Directors.
Risks Related to the Ownership of our Common
Stock
There is not presently an active market for
shares of our common stock, and therefore, you may be unable to sell any shares of our common stock in the event that you need
a source of liquidity.
Our common stock is traded on the OTCQB quotation
system, which is a FINRA-sponsored entity and operated inter-dealer automated quotation system for equity securities not included
in a national exchange. Quotation of our securities on the OTCQB limits the liquidity and price of our common stock more than if
our common stock were quoted or listed on the NYSE or the NASDAQ, which are national securities exchanges. Although our common
stock is quoted on the OTCQB, our common stock trades infrequently and in low volumes on the OTCQB. A public trading market in
our common stock having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of
willing buyers and sellers of our common stock at any time. This presence depends on the individual decisions of investors and
general economic and market conditions over which we have no control. In the event an active market does not develop, you may be
unable to sell your shares of common stock at or above the price you paid for them or at any price.
Our stock price
may be volatile.
The market price of our
common stock is likely to be volatile and could be subject to wide fluctuations in response to, among other things, the risk factors
described in this section of this Annual Report, and other factors beyond our control. Factors affecting the trading price of our
common stock could include:
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variations in our operating results;
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variations in operating results of similar companies and competitors;
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changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;
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changes in our outlook for future operating results which are communicated to investors and analysts;
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announcements of technological innovations, new products, services or service enhancements, strategic alliances or agreements by us or by our competitors;
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marketing and advertising initiatives by us or our competitors;
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the increase or decrease of listings;
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threatened or actual litigation;
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changes in our management;
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recruitment or departures of key personnel;
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market conditions in our industry, the travel industry and the economy as a whole;
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the overall performance of the equity markets;
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sales of shares of our common stock by existing stockholders;
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the reports of industry research analysts who cover our competitors and us;
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stock-based compensation expense under applicable accounting standards; and
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adoption or modification of regulations, policies, procedures or programs applicable to our business.
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Furthermore, the stock
markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities
of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.
These broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest
rate changes or international currency fluctuations, may negatively affect the market price of our common stock regardless of our
actual operating performance. Each of these factors, among others, could harm the value of our common stock.
In the past, many companies
that have experienced volatility in the market price of their stock have been subject to securities class action litigation; we
are currently the target of this type of litigation. Securities litigation against us, regardless of the merits or outcome, could
result in substantial costs and divert our management’s attention from other business concerns, which could materially harm
our business.
If securities analysts
and other industry experts do not publish research or publish negative research about our business, our stock price and trading
volume could decline.
The trading market for
our common stock depends in part on the research, reports and other media that securities analysts and other industry experts publish
about us or our business. If security analysts don’t cover our stock, downgrade our stock or publish negative research about
our business, our stock price could decline. If analysts do not cover us in the future, cease coverage of our company or fail to
publish reports on us regularly, we could lose visibility in the stock market and demand for our stock could decrease, which could
cause our stock price or trading volume to decline. If one or more industry analysts publish negative statements about our business,
our stock price could decline.
Failure to adequately
manage our growth may seriously harm our business.
We plan to grow our business
as rapidly as possible. If we do not effectively manage our growth, the quality of our services may suffer, which could
negatively affect our reputation and demand for our services. Our growth may place a significant strain on our managerial,
administrative, operational, and financial resources and our infrastructure. Our future success will depend, in part, upon the
ability of our senior management to manage growth effectively. This will require us to, among other things:
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implement additional management information systems;
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further develop our operating, administrative, legal, financial, and accounting systems and controls;
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hire additional personnel;
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develop additional levels of management within our company;
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locate additional office space;
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maintain close coordination among our engineering, operations, legal, finance, sales and marketing, and client service and support organizations; and
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manage our expanding international operations.
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As a result, we may lack
the resources to deploy our services on a timely and cost-effective basis. Failure to accomplish any of these requirements
could impair our ability to deliver services in a timely fashion or attract and retain new customers.
We do not anticipate
paying any dividends on our common stock.
We do not anticipate paying
any cash dividends on our common stock in the foreseeable future. If we do not pay cash dividends, our stockholders could receive
a return on their investment in our common stock only if the market price of our common stock has increased when they sell their
shares.
Our incorporation documents and Nevada law
may inhibit a takeover that stockholders consider favorable and could also limit the market price of our common stock, which may
inhibit an attempt by our stockholders to change our direction or management.
Nevada law and our articles of incorporation contain
provisions that could delay or prevent a change in control of our Company. Some of these provisions include the following:
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authorize our board of directors to determine the rights, preferences, privileges and restrictions granted to, or imposed upon, the preferred stock and to fix the number of shares constituting any series and the designation of such series without further action by our stockholders; and
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Prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.
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These and other provisions
in our articles of incorporation, as amended, and under Nevada law could reduce the price that investors might be willing to pay
for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.
Furthermore, these provisions may inhibit an attempt by our stockholders to change our direction or management.
We adopted provisions in our amended and
restated articles of incorporation limiting the liability of management to stockholders.
We have adopted provisions,
and will maintain provisions, to our amended and restated articles of incorporation that limit the liability of our directors,
and provide for indemnification by us of our directors and officers to the fullest extent permitted by Nevada law. Our amended
and restated articles of incorporation and Nevada law provide that directors have no personal liability to third parties for monetary
damages for actions taken as a director, except for breach of duty of loyalty, acts or omissions not in good faith involving intentional
misconduct or knowing violation of law, unlawful payment of dividends or unlawful stock repurchases, or transactions from which
the director derived improper personal benefit. Such provisions limit the stockholders’ ability to hold directors liable
for breaches of fiduciary duty and reduce the likelihood of derivative litigation against directors and officers.
Our common stock is a “penny stock”
under SEC rules. It may be more difficult to resell securities classified as “penny stock.”
Our common stock is a “penny stock”
under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). Unless we maintain
a per-share price above $5.00, or meet other qualifications, these rules impose additional sales practice requirements on broker-dealers
that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers”
or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons
of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt
from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny
stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose
the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market
value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is
a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction. Legal remedies
available to an investor in “penny stocks” may include the following:
If a “penny stock” is sold to the investor
in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the
purchase and receive a refund of the investment.
If a “penny stock” is sold to the investor
in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.
However, investors who have signed arbitration
agreements may have to pursue their claims through arbitration.
These requirements may have the effect of reducing
the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The
additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in
our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the
ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
Many brokerage firms will discourage or refrain
from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many
individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated
with these investments. For these reasons, penny stocks may have a limited market and, consequently, limited liquidity.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our executive, administrative and operating offices
are primarily located in Weston, Florida where we lease approximately 2,500 square feet of office space. The Company leases its
office space and certain office equipment under non-cancellable operating leases. In accordance with the terms of the office space
lease agreement, the Company is renting the commercial office space, for a term of three years from January 1, 2016 through December
31, 2018. Monthly rental costs for calendar years 2016, 2017 and 2018 are $6,500, $6,695 and $6,896, respectively per month. The
rent for the years ended February 28, 2017 and February 29, 2016 was $79,665 and $227,694, respectively.
Item 3. Legal Proceedings
The Company is involved,
from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business,
including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other
related claims and vendor matters. The Company believes that the resolution of currently pending matters will not individually
or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of
the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company
or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability
or outcome of such litigation or claims.
On March 14, 2014, Lewis
Global Partners, LLC filed a Complaint against us in the Ninth Judicial Circuit Court of Florida (Case Number CACE 14-005009) (the
“Complaint”). The Complaint alleges consulting fees in the form of 270,000 shares of common stock of RealBiz is due
from us and sets forth causes of action including ‘breach of contract’ and ‘breach of implied covenant of good
faith and fair dealing’. On August 18, 2016, the breach of implied covenant of good faith and fair dealing was dismissed
and we filed an answer and affirmative defenses to the breach of contract claim.. The Company has no basis for determining whether
there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation.
On March 28, 2016, the
Company was presented with a Demand for Arbitration, pursuant to Rule 4(a) of the American Arbitration Association Commercial Rules
of Arbitration, whereby Acknew Investments, Inc. and Vice Regal Developments Inc. (Claimants) are arguing that $700,000 is due
to them, even though they have already been paid said amounts through preferred shares that were issued as a guarantee and which
Claimants converted into shares of common stock. In connection with the purchase of the stock of the entity that eventually became
RealBiz Media Group, Inc., the Company issued 380,000 shares of Monaker Series D Preferred Stock shares with a value of $1,900,000,
which was considered the $1,200,000 value of the stock portion of the purchase price, and was also meant to guaranty the payment
of the balance of $700,000. The Company contends that the obligation to pay the $700,000 was extinguished with the conversion of
the Monaker Series D Preferred Stock shares into shares of common stock. The date for arbitration has not been set and the Company
will vehemently defend its position.
On June 2, 2016, the Company
paid an arbitration award of $81,572 ($73,959 plus interest of $7,613) to Twelfth Child Entertainment, LLC for a License Agreement
settlement for rights to air programs regarding “Foreclosure to Fabulous” television programming on the Company’s
previously owned media business that was sold on January 21, 2016. The Company absorbed this settlement as part of its partnership
commitment with Launch Media 360 which is an investment of the Company.
Litigation related to RealBiz Media
Group, Inc. (“RealBiz”)
Case Number 1:16-cv-61017-FAM
On May 11, 2016, RealBiz filed a Complaint
against us in the United States District Court for the Southern District of Florida (the “Complaint”). The Complaint
alleges $1,287,517 is due from us to RealBiz, and seeks the recovery of such amount, plus pre- judgment interest from October 31,
2015 and costs. The Complaint alleges causes of action including ‘account stated’ and ‘unjust enrichment’.
On May 19, 2016, we filed an Answer and
Counterclaim to the Complaint (the “Counterclaim”) denying RealBiz’s allegations and claims and pleading affirmative
defenses including ‘failure to state a claim for which relief can be granted’, ‘set-off’ rights (including
that if there was any amount owed, RealBiz’s obligation to us far exceeded the $1.2 million amount that RealBiz alleges is
due to it), ‘mistake or error’, ‘unclean hands’, ‘waiver’, ‘release’, ‘breach
of contract’ (we allege there was an oral agreement that all intercompany balances would be written–off) and ‘rescission
of letter addressing partial balance due’ (confirming that a letter upon which RealBiz’s case is predicated was rescinded
shortly after its issuance and is of no force or effect). The Counterclaim against RealBiz alleges causes of action including ‘unjust
enrichment’ (we allege that the net amount due to us from RealBiz is in excess of $10 million dollars if there is no oral
agreement), ‘money had and received’, and ‘breach of contract’ (we allege there was an oral agreement that
all intercompany balances would be written–off), and seeks recovery of all actual damages, consequential damages and incidental
damages, if any, including but not limited to attorney’s fees and costs, plus-prejudgment and post-judgment interest. We
believe the claims asserted in the Complaint, as amended, are without merit and intend to vigorously defend ourselves against the
lawsuit while simultaneously seeking damages against RealBiz. The Company has no basis for determining whether there is any likelihood
of material loss associated with the claims and/or the potential and/or the outcome of the litigation.
Case No.: CACE-16-019818
On October 27, 2016, the
Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs, Inc.
and American Stock Transfer & Trust Company, LLC) for damages and injunctive relief from the defendant’s unreasonable
delay and/or refusal to register the transfer of certain securities. We instructed RealBiz to transfer our preferred or common
stock in RealBiz to certain of our shareholders on several occasions. Defendants, however, wrongfully refused to register the transfers
in violation of the Delaware Code and the terms of RealBiz’s preferred and common stock.
Case No.: 16-24978-CIV-GRAHAM
On November 30, 2016,
the Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs,
Inc. and American Stock Transfer & Trust Company, LLC) for damages and injunctive and declaratory relief, arising from RealBiz’s
declared cancellation, retirement, and/or termination of certain securities. RealBiz notified Monaker of its intent to unilaterally
cancel, retire, and/or terminate its preferred and common stock held by Monaker. RealBiz’s announced cancellation, retirement,
and termination was without Monaker’s consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s
preferred and common stock.
In December 2016, RealBiz
cancelled the 44,470,101 preferred Series A shares and 10,359,892 common shares which were held by the Company in connection with
an over issuance of common shares relating to the conversion of Monaker’s dual convertible preferred shares. In December
2016, the Company filed a lawsuit against RealBiz in 11th Circuit Federal Court seeking an injunction against RealBiz’s action
to claw back the aforementioned shares; the injunction was denied and the lawsuit is proceeding. Additionally, the Company seeks
to reverse the clawback in its entirety.
Case No.: 0:16-cv-62902-WJZ
A class action lawsuit has been filed against
us, William Kerby, our Chief Executive Officer and Chairman, Donald Monaco, our director, and D’Arelli Pruzansky, P.A., our
former auditor, in the U.S. District Court for the Southern District of Florida on behalf of persons who purchased our common stock
and exercised options between April 6, 2012 and June 23, 2016 (the “Class Period”). The case, McLeod v. Monaker Group,
Inc. et al, was filed on December 9, 2016. The lawsuit focuses on whether the Company and its executives violated federal securities
laws and whether the Company’s former auditor was negligent and makes allegations regarding the activities of certain Company
executives. The lawsuit alleges and estimates total shareholders losses totaling approximately $20,000,000. The lawsuit stems from
the Company’s announcement in June 2016 that it would have to restate its financial statements due to issues related to the
Company’s investment in RealBiz. The lawsuit asks the court to confirm the action is a proper class action. We believe the
claims asserted in the lawsuit are without merit and intend to vigorously defend ourselves against the claims made in the lawsuit
The Company has no basis for determining whether there is any likelihood of material loss associated with the claims and/or the
potential and/or the outcome of the litigation. On February 16, 2017, we filed a Motion to Dismiss the lawsuit and on March 3,
2017, the Court entered an order staying discovery and all other proceedings pending resolution of the Motion to Dismiss.
Case No.: C.A 2017-0189
On March 14, 2017, we filed a lawsuit against RealBiz
pursuant to Section 220 of Delaware General Corporation Law, seeking relief in the form of an order compelling RealBiz to make
available to Monaker, for inspection and copying, certain corporate books and records as demanded by Monaker in a February 27,
2107 letter (the “Demand”). In addition to our statutory right to inspection under Section 220, we have contractual
rights to access books and records as outlined in the documents governing our investment in RealBiz. Monaker’s purpose in
making the Demand is, among other things, to: (1) determine the status of its investment and interest in RealBiz; (2) determine
the appropriateness of certain actions recently announced by RealBiz; (3) investigate suspected wrongdoing by certain officers
and directors of RealBiz; and (4) determine whether the RealBiz’s directors advanced their personal interests at the expense
of Monaker and other investors. RealBiz has declined to produce the requested books and records despite the Demand and communications
between the parties’ counsels, filed a motion to dismiss taking the position that the Company is no longer a shareholder
of RealBiz, and has insisted instead that Monaker serve a [second] request for production in a separate action, Monaker Group,
Inc. v. RealBiz Media Group, Inc., No. 1:16-cv-24978-DLG, currently pending in the Southern District of Florida (the “Florida
Action”).
The Company is unable
to determine the estimate of the probable or reasonably possible loss or range of losses arising from the above legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market
Information
Our
common stock currently trades on the OTCQB market under the ticker symbol “MKGI”. Our fiscal year end is February
28 or 29 depending on the year. The following table sets forth the high and low trading price of our common stock for each quarter
during the past two (2) fiscal years:
Period
|
|
High
Price
|
|
Low
Price
|
Fiscal Year Ended February 29, 2016
|
|
|
|
|
First Quarter
|
|
$
|
4.47
|
|
|
$
|
1.25
|
|
Second Quarter
|
|
$
|
9.99
|
|
|
$
|
2.85
|
|
Third Quarter
|
|
$
|
4.10
|
|
|
$
|
2.21
|
|
Fourth Quarter
|
|
$
|
5.00
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended February 28, 2017
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.85
|
|
|
$
|
1.33
|
|
Second Quarter
|
|
$
|
4.35
|
|
|
$
|
1.71
|
|
Third Quarter
|
|
$
|
3.80
|
|
|
$
|
2.11
|
|
Fourth Quarter
|
|
$
|
2.80
|
|
|
$
|
1.95
|
|
These
quotations reflect interdealer prices, without retail markup, markdown, or commission and may not represent actual transactions.
Holders
On
May 3, 2017, there were 150 holders of record of our common stock. Because many of our shares of common stock are held by brokers
and other institutions on behalf of stockholders, this number of record stockholders is not indicative of the total number of
stockholders of the Company when including securities beneficially owned.
Dividend
Policy
We
have neither declared nor paid cash dividends on our common stock and do not expect to pay dividends on our common stock for the
foreseeable future. We anticipate all of our earnings will be used for the operation and growth of our business. Any future determination
to pay dividends on our common stock would be subject to the discretion of our board of directors and would depend upon various
factors, including our results of operations, financial condition and liquidity requirements, restrictions that may be imposed
by applicable law and our contracts, and other factors deemed relevant by our board of directors.
Equity
Compensation Plan
The
option plan has been terminated as of February 29, 2016.
As
of February 28, 2015, the plan had 558 shares to be issued upon exercise of the outstanding options, with an average exercise
price of $7.25 and there were 682 options available to be issued when the plan was terminated.
Transfer
Agent
Our
stock transfer agent is American Stock Transfer Co. (“AST”), 6201 15
th
Avenue, Brooklyn, NY 11219. AST’s
telephone number in the U.S. is (718) 921-8124 and their internet address is
www.amstock.com
.
Equity
Compensation Plan Information
Plan category
|
|
|
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights as
of February 28, 2017
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
|
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Equity compensation plans not approved by security holders
|
|
|
795,925
|
|
|
$
|
2.35
|
|
|
—
|
|
Total
|
|
|
795,925
|
|
|
$
|
2.35
|
|
|
—
|
|
Description
of Capital Stock
Common
Stock
On
October 28, 2011, the Board and the holders of a majority of the voting power of our shareholders approved an amendment to our
Articles of Incorporation to increase our authorized shares of common stock from 200,000,000 to 500,000,000. On February 13, 2012,
the Board and the holders of a majority of the voting power of our shareholders approved an amendment to our Articles of Incorporation
to increase our authorized shares of common stock from 500,000,000 to 2,500,000,000. The increases in our authorized shares of
common stock became effective upon the filing of the amendments to our Articles of Incorporation with the Secretary of State of
the State of Nevada.
On
May 2, 2012, the Board approved an amendment to our Articles of Incorporation to (i) effect a 1-for-500 reverse split of the Company’s
outstanding common stock and (ii) reduce the number of authorized shares from 2,500,000,000 to 5,000,000. Such actions became
effective upon the filing of the amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada.
The consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.
On
June 26, 2012, the Board and the holders of a majority of the voting power of our shareholders approved an amendment to our Articles
of Incorporation to increase our authorized shares of common stock from 5,000,000 shares to 500,000,000 shares.
On
June 25, 2015, the Board approved an amendment to our Articles of Incorporation to (i) effect a 1-for-50 reverse split of the
Company’s outstanding common stock and (ii) change the name of the Company from Next 1 Interactive, Inc. to Monaker Group,
Inc. Such actions became effective upon the filing of the amendment to our Articles of Incorporation with the Secretary of State
of the State of Nevada. The unaudited consolidated financial statements have been retroactively adjusted to reflect this reverse
stock split.
Preferred
stock
The
aggregate number of shares of preferred stock that the Company is authorized to issue is up to One Hundred Million (100,000,000),
with a par value of $0.00001 per share (the “Preferred Stock”) with the exception of Series A Preferred Stock shares
having a $0.01 par value per share. The Preferred Stock may be divided into and issued in series. The Board of Directors of the
Company is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated
as to distinguish the shares thereof from the shares of all other series and classes. The Board of Directors of the Company is
authorized, within any limitations prescribed by law and the articles of incorporation, to fix and determine the designations,
rights, qualifications, preferences, limitations and terms of the shares of any series of Preferred Stock.
On
August 26, 2016, we converted all of our outstanding Series B (110,200 shares), Series C (13,100 shares) and Series D (110,156
shares) Preferred Stock, into an aggregate of 444,712 shares of our common stock, pursuant to certain special conversion terms
offered in connection therewith and the mandatory conversion terms thereof.
Additionally,
stockholders holding 15,000 shares of our Series B Convertible Preferred Stock and 22,000 shares of our Series D Convertible Preferred
Stock requested the conversion of such shares into 2,233,260 shares of RealBiz common stock. Pursuant to the customary practice
of the Company and RealBiz, the Company first requested that RealBiz’s transfer agent convert shares of RealBiz Preferred
A owned by the Company, into RealBiz common stock as provided by the designation of the RealBiz preferred stock. This request
was denied by RealBiz and RealBiz’s transfer agent. The Company then requested that the Company’s transfer agent cancel
the converted shares and that RealBiz’s transfer agent which is also Monaker’s transfer agent (American Stock Transfer)
transfer shares of common stock of RealBiz held by the Company to such shareholders to satisfy the conversion obligations. To
date, RealBiz has refused to recognize or effect the transfers. On November 16, 2016, RealBiz notified Monaker that the Board
of Directors of RealBiz voted to cancel and retire all issued and outstanding shares of RealBiz Preferred Stock and all but 1,341,533
shares of common stock of RealBiz held by Monaker. RealBiz’s announced cancellation and retirement was without Monaker’s
consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s preferred and common stock.
On
November 30, 2016, the Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group,
Inc., f/k/a Webdigs, Inc. and American Stock Transfer & Trust Company, LLC Case No.: 16-24978-CIV-GRAHAM) for damages and
injunctive and declaratory relief, arising from RealBiz’s declared cancellation, retirement, and/or termination of the securities
described above.
In
December 2016, RealBiz cancelled the 44,470,101 preferred Series A shares and 10,359,892 common shares which were held by the
Company in connection with an over issuance of common shares relating to the conversion of Monaker’s dual convertible preferred
shares. In December 2016, the Company filed a lawsuit against RealBiz in 11th Circuit Federal Court seeking an injunction against
RealBiz’s action to claw back the aforementioned shares; the injunction was denied and the lawsuit is proceeding. Additionally,
the Company seeks to reverse the clawback in its entirety.
All
Preferred Stock Series B, C and D shares have been retired. The Preferred Stock Series A have not been retired and William Kerby,
our Chief Executive Officer and Chairman, beneficially owns 794,611 shares (or 43% of the outstanding Preferred Stock Series A
shares) and Donald Monaco, our Director, beneficially owns 1,075,000 shares (or 57% of the outstanding Preferred Stock Series
A shares).
Series
A Preferred Stock
The
Company has authorized and designated 3,000,000 shares of Preferred Stock as Series A 10% Cumulative Convertible Preferred Stock,
par value $0.01 per share (the “Series A Preferred Stock”). The holders of record of shares of Series A Preferred
Stock shall be entitled to vote on all matters submitted to a vote of the shareholders of the Company and shall be entitled to
one hundred (100) votes for each share of Series A Preferred Stock.
Per
the terms of the Amended and Restated Certificate of Designations relating to the Series A Preferred Stock, subject to the availability
of authorized and unissued shares of Series A Preferred Stock, the holders of Series A Preferred Stock may, by written notice
to the Company:
|
●
|
elect
to convert all or any part of such holder’s shares of Series A Preferred Stock
into common stock at a conversion rate of the lower of:
|
|
○
|
(a)
$25.00 per share; or
|
|
○
|
(b)
at the lowest price the Company has issued stock as part of a financing.
|
|
●
|
convert
all or part of such holder’s shares (excluding any shares issued pursuant to conversion
of unpaid dividends) into debt obligations of the Company, secured by a security interest
in all of the assets of the Company and its subsidiaries, at a rate of $25.00 of debt
for each share of Series A Preferred Stock.
|
On
July 9, 2013, the Company amended the Certificate of Designations for the Company’s Series A Preferred Stock to allow for
conversion into Series C Preferred stock to grant to a holder of the Series A Preferred Stock the option to:
|
●
|
elect
to convert all or any part of such holder’s shares of Series A Preferred Stock
into shares of the Company’s Series C Convertible Preferred Stock, par value $0.00001
per share (“Series C Preferred Stock”), at a conversion rate of five (5)
shares of Series A Preferred Stock for every one (1) share of Series C Preferred Stock;
or to allow conversion into common stock at the lowest price the Company has issued stock
as part of a financing to include all financing such as new debt and equity financing
and stock issuances as well as existing debt conversions into stock.
|
On
February 28, 2014, the Company’s Series A Preferred Stock shareholders agreed to authorize a change to the Certificate of
Designations of the Series A Preferred Stock in Nevada to lock the conversion price to the lower of (a) a fixed price of $0.50
per share; and (b) the lowest price the Company has issued stock as part of a financing after January 1, 2006.
In
the event of any liquidation, dissolution or winding up of this Company, either voluntary or involuntary (any of the foregoing,
a “liquidation”), holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Company to the holders of the common Stock or any other series of Preferred Stock by
reason of their ownership thereof an amount per share equal to $1.00 for each share (as adjusted for any stock dividends, combinations
or splits with respect to such shares) of Series A Preferred Stock held by each such holder, plus the amount of accrued and unpaid
dividends thereon (whether or not declared) from the beginning of the dividend period in which the liquidation occurred to the
date of liquidation.
Series
B Preferred Stock
The
Company has authorized and designated 3,000,000 shares of Preferred Stock as Non-Voting Series B 10% Cumulative Convertible Preferred
Stock with a par value of $0.00001 per share (the “Series B Preferred Stock”). The holders of Series B Preferred Stock
may elect to convert all or any part of such holder’s shares into:
|
●
|
common
stock on a one for fifty basis, or
|
|
●
|
shares
of RealBiz’s common stock at $0.05 per share.
|
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “liquidation”), the
holders are entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated
value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of
then outstanding Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities
(common stock), and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to
be distributed to the holders shall be ratably distributed among the holders of all preferred stock in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Series
C Preferred Stock
The
Company has authorized and designated 3,000,000 shares of Preferred Stock as Non-Voting Series C 10% Cumulative Convertible Preferred
Stock with a par value of $0.00001 per share (the “Series C Preferred Stock”). The holders of Series C preferred stock
may elect to convert all or any part of such holder’s shares into:
|
●
|
common
stock on a 2.5 for one basis, or
|
|
●
|
shares
of RealBiz’s common stock at $0.10 per share.
|
On
July 9, 2014, the Company filed an Amendment to its Series C Certificate of Designation with the Secretary of State of the State
of Nevada to change the conversion price from $250 to $12.50 per share.
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “liquidation”), the
holders are entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated
value of $5 per share, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for
each share of then outstanding Series C Preferred Stock before any distribution or payment is to be made to the holders of any
junior securities (common stock), and if the assets of the Company are insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders are to be ratably distributed among the holders of all preferred stock in accordance with
the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Series
D Preferred Stock
The
Company has authorized and designated 3,000,000 shares of Preferred Stock as Non-Voting Series D 10% Cumulative Convertible Preferred
Stock with a par value of $0.00001 per share (the “Series D Preferred Stock”). The holders of Series D preferred stock
may elect to convert all or any part of such holder’s shares into:
|
●
|
common
stock on a 2.5 for one basis, or
|
|
●
|
shares
of RealBiz common stock at $0.15 per share.
|
On
July 9, 2014, the Company filed an Amendment to its Series D Certificate of Designation with the Secretary of State of the State
of Nevada to change the conversion price from $250.00 to $12.50 per share.
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “liquidation”), the
holders are entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated
value of $5 per share, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for
each share of then outstanding Series D Preferred Stock before any distribution or payment is to be made to the holders of any
junior securities (common stock), and if the assets of the Company are insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders are to be ratably distributed among the holders of all preferred stock in accordance with
the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Share
Repurchase Transactions
During
the years ended February 28, 2017 and February 29, 2016, there were no repurchases of the Company’s common stock by Monaker.
Recent
Issuances of Unregistered Securities
During
the fourth quarter of the fiscal year ended February 28, 2017 and through the date of this filing, we have issued the following
securities which were not registered under the Securities Act;
Common
Stock
|
●
|
805,000 units (composed of 805,000 shares of restricted common stock and 805,000 warrants with exercise
price ranging from $1.50 (expiring December 4, 2017) to $2.00 (expiring between January 31, 2020 and April 2, 2020)) were sold
to 16 “accredited investor” purchasers in private transactions pursuant to subscription agreements at $2.00 per share
for $1,610,000 in proceeds. Included in the 805,000 shares issued were shares issued to:
|
|
○
|
Monaco Investment Partners II, LP, of which Donald Monaco is the managing general partner and a Director
of the Company ($200,000 of units at $2.00 per unit (100,000 total units), each comprised of 1 share of common stock and 1 warrant
to purchase one share of common stock at an exercise price of $2.00 per share.
|
|
○
|
Robert Post 2007 Revocable Trust, of which Robert Post is the trustee and a Director of the Company ($100,000
of units at $2.00 per unit (50,000 total units), each comprised of 1 share of common stock and 1 warrant to purchase one share
of common stock at an exercise price of $2.00 per share.
|
|
●
|
341,724 shares of restricted common stock were sold to 8 “accredited investor” purchasers
in private transactions pursuant to the exercise of warrants which had exercise prices ranging from $.50 - $2.00 per share for
$506,488 in proceeds. Included in the 341,724 shares issued were shares issued to:
|
|
○
|
Stephen Romsdahl, a greater
than 5% shareholder of the Company (142,444 shares of restricted common stock pursuant to a warrant exercise for $157,388 in proceeds);
and
|
|
○
|
Simon Orange, a Director of
the Company (158,000 shares of restricted common stock pursuant to a warrant exercise for $316,000 in proceeds).
|
|
●
|
259,216 shares of restricted
common stock were issued to eight consultants pursuant to consulting agreements, valued at $533,240.
|
|
●
|
4,579 shares of restricted common stock were issued to an investor pursuant to the October 27, 2015 Agreement
and Plan of Merger with Always On Vacation, Inc., valued at $11,448.
|
On January 5, 2017, we entered into an
employment agreement with an employee of the Company, whereby the employee agreed to provide management and financial/investor
relation services to the Company for a term of one year, cancellable by either party with 30 days prior written notice, in consideration
for $10,000 per month and the grant of warrants to purchase (a) 100,000 shares of the Company’s common stock, which will
vest and be exercisable at such time as the Company successfully up lists to the NYSE MKT or the NASDAQ Capital Market, and have
an exercise price of $3 per share and cashless exercise rights; (b) 50,000 shares of the Company’s common stock, which will
vest and be exercisable upon the earlier to occur of (i) the second year of the term of such warrants; (ii) when the institutional
ownership of the Company’s totals 10% or more of the Company’s outstanding common stock, and have an exercise price
of $4 per share and cashless exercise rights; and (c) 50,000 shares of the Company’s common stock, which will vest and be
exercisable upon the earlier to occur of (i) the second year of the term of such warrants; (ii) when the institutional ownership
of the Company’s totals 20% or more of the Company’s outstanding common stock, and have an exercise price of $5 per
share and cashless exercise rights, as well as certain other to be determined fees in the event the Company undertakes certain
transactions in the future. All of the warrants vest immediately in the event the Company is acquired and have a term through
December 31, 2019.
On April 19, 2017, we issued 100,000 shares of common stock to Omar Jimenez, a member of the Board of Directors
and an executive of the Company, valued at $250,000, as a fiscal year-ended February 28, 2017 employee bonus.
We claim an exemption from registration for the issuances and sales described above pursuant to Section 4(a)(2)
and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipients
were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required
in a Registration Statement under the Securities Act, the recipients acquired the securities for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any
general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and grant
and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates
evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities
Act and may not be offered or sold absent registration or pursuant to an exemption there-from. The securities were not registered
under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption
from registration under the Securities Act and any applicable state securities laws.
Item
6. Selected Financial Data
Not
applicable.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of the financial condition and results of our operations should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in this filing. In addition to historical consolidated
financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
These statements involve risks and uncertainties and our actual results could differ materially from those discussed below. See
the “Forward-Looking Statements” disclosure above for a discussion of the uncertainties, risks and assumptions associated
with these statements. See also the “Risk Factors” disclosure above for additional discussion of such risks.
Growth
Opportunities and Trends
Our
ability to further grow our revenue will depend largely on increasing the number of distributors, the number of paid listings,
increasing revenue per listing and increasing revenue from other products and services through our marketplace.
Our
achievement of these objectives will further depend on our ability to successfully enable more online bookable listings. Achieving
growth in the number of distributors and the number of listings involves our ability to (i) increase our listing renewal rates,
(ii) reach new distributors, property managers and owners through marketing activities, and/or (iii) obtain new listings through
geographic expansion, strategic acquisitions or investments. Increasing revenue per listing and revenue from other products and
services will involve our ability to successfully drive more bookings to our performance based listings and to successfully introduce
new products to our marketplace.
In
the future, we believe it will become more important to increase marketing investments to grow and further advertise our brand
and products to distributors and travelers. We have seen other companies launch online businesses offering vacation rentals or
other alternatives to hotels. We believe this growing favorable awareness of alternatives to hotels has and will support growth
in our business. However, we have also seen a trend of increased government regulation and taxation of the industry. We continue
to monitor the effects of these trends and will take actions as necessary to mitigate their effects.
Key
Financial Highlights
Key
financial highlights for the fiscal year end (FYE) February 28, 2017 include the following:
|
●
|
Travel
and commission revenue was approximately $400,000 compared to $545,000 for FYE February 29, 2016, or a decrease of 26.5%;
however, total revenues for FYE February 29, 2016 included $300,000 of released funds from a reserve account with a
merchant processor. Therefore, if you were to remove that one-time release of funds from revenue for FYE February 29,
2016, operating travel and commission revenues for FYE February 29, 2016, would have amounted to $245,000 compared to
$400,000 for FYE February 28, 2017 for an increase of 63.6%;
|
|
|
|
|
●
|
Net
loss attributable to Monaker Group, Inc. was $7.1 million, or $0.82 per diluted share for FYE February 28, 2017, compared
to net loss of $4.5 million, or $1.56 per diluted share, in FYE February 29, 2016, or an increase of 56%;
|
|
|
|
|
●
|
Cash
used in operating activities was $3.7 million for FYE February 28, 2017 compared to $2.1 million for FYE February 29,
2016, or an increase of 76%;
|
|
|
|
|
●
|
There
was a net increase in cash of $869,000 for FYE February 28, 2017, compared to a decrease in cash of $88,000 for FYE February
29, 2016; and
|
|
|
|
|
●
|
Cash
and cash equivalents as of February 28, 2017 were $1,007,065.
|
Revenue
Recognition
We
recognize revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of
cancellation has expired, the sales price is fixed or determinable and collectability is reasonably assured.
Revenue
for customer travel packages purchased directly from the Company are recorded gross (the amount paid to the Company by
the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of
revenues).
Business
Combinations
The
purchase prices of acquired businesses or acquired assets have been allocated to the tangible and intangible assets acquired and
liabilities assumed, based upon their estimated fair value at the date control is obtained. The difference between the purchase
price and the fair value of the net assets acquired is recorded as goodwill.
Most
of the businesses we have acquired did not have a significant amount of tangible assets. We typically identified the following
identifiable intangible assets in each acquisition: trade name, customer relationships and internal software. In making certain
assumptions on valuation and useful lives, we considered the unique nature of each acquired asset.
Determining
the estimated fair value of assets involves the use of significant estimates, judgment and assumptions, such as future cash flows
and selection of comparable companies. Future changes in our assumptions or the interrelationship of those assumptions may negatively
impact future valuations and could result in an impairment of goodwill or intangible assets that may have a material effect on
our financial condition and operating results.
Definite-lived
intangible assets are recorded at cost and amortized using a method that reflects our best estimate of the pattern in which the
economic benefit of the related intangible asset is utilized.
Goodwill
and indefinite-lived intangible assets, such as certain trade names, are not amortized and are subject to annual impairment tests
during the fourth quarter, or whenever events or circumstances indicate impairment may have occurred. For goodwill and indefinite
lived intangible assets, we complete a quantitative analysis that compares the fair value of our reporting unit or indefinite-lived
intangible assets to the carrying amounts, and an impairment loss is recognized equivalent to the excess of the carrying amount
over the fair value.
Stock-Based
Compensation
We
have stock-based compensation plans which allow for the issuance of stock-based awards, restricted stock units and restricted
stock awards. We account for stock-based compensation expense by amortizing the fair value of each stock-based award expected
to vest over the requisite service or performance period. The fair value of restricted stock awards is based on the number of
shares granted and the closing price of our common stock on the date of grant. The fair value of each stock warrant award is calculated
on the date of grant using the Black-Scholes option-pricing model.
The
Black-Scholes model requires various assumptions including fair value of the underlying stock, volatility, expected term, risk-free
interest rate and expected dividends. We use our historical experience to estimate the expected forfeiture rate of awards, and
only recognize expense for those awards expected to vest. To the extent the actual forfeiture rate is different from the estimate,
the stock-based compensation expense is adjusted accordingly. If any of the assumptions we use in estimating the fair value of
awards change significantly or the actual forfeiture rate is different than the estimate, stock-based compensation expense may
differ materially in the future.
RESULTS
OF OPERATIONS
Results
of Operations for the Fiscal Year Ended February 28, 2017 Compared to the Fiscal Year Ended February 29, 2016
Revenues
Total
travel and commission revenues decreased 26.5% to $400,277 for the fiscal year ended (FYE) February 28, 2017, compared to $544,658
for the FYE February 29, 2016, a decrease of $144,381. This decrease is mainly due to non-recurring funds from a merchant processor
in the amount of $300,000, received during FYE February 29, 2016. Therefore, if such one-time non-recurring merchant processor
funds are removed from the calculation, travel and commission revenues for the FYE February 29, 2016 amounted to $244,658, compared
to $400,277 for the FYE February 28, 2017, an increase of $155,619 or 63.6%, which increase is attributable to the marketing efforts
throughout the fiscal year which resulted in an increase in booked travel during the last quarter of FYE February 28, 2017.
Operating
Expenses
Our
operating expenses, including cost or revenues, technology and development, salaries and benefits, selling and promotion,
amortization of intangibles and general and administrative expenses, increased 80% to $7,332,055 for the FYE February 28,
2017, compared to $4,073,300 for the fiscal year ended February 29, 2016, an increase of $3,258,755.
This
increase was mainly due to increases in general and administrative costs of $3,040,489 which is mostly attributable to
amortization of three non-performing platforms (amounting to $1,779,820) and professional fees of $653,588 related to RealBiz
litigation (see Item 3. Legal Proceedings), increased cost of revenues of $141,937 directly related to increases in booked
travel, increases in technology and development of $189,638 related to the discontinued platforms (a new platform is being
developed through third party vendors and the related costs are capitalized), and increases in selling and promotional
expenses of $154,791 related to the promotions and advertising of our tour products and creating awareness of the NextTrip
brand. These increases were offset by a decrease in salaries and benefits of $268,100, as personnel were reduced and we
relied more on third party vendors.
Other
Expenses
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●
|
Gain
on extinguishment of debt amounts increased to $97,942 for the FYE February 28, 2017,
compared to zero for the FYE February 29, 2016, in connection with the settlement of
legacy amounts due.
|
|
●
|
Gain
on sale of investments increased to $66,011 for the FYE February 28, 2017, compared to
zero for the FYE ended February 29, 2016, primarily due to the gain on the sale of Name
Your Fee, LLC which was offset by losses attributable to honoring debts of Next 1 Network,
Inc. that was sold on January 23, 2016, and losses on investments in Launch Media and
Recruiter.com that were marked to market value.
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|
●
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Interest
expense decreased 35.5% to $248,200 for the FYE February 28, 2017, compared to $384,899
for the FYE February 29, 2016, a decrease of $136,699, which was due primarily to pay-offs
and settlement of approximately $1,032,843 of notes payable at interest rates from 6%
to 7% per annum and offset by interest on a $1.2 million line of credit ($1.193 million
drawn) which accrues interest at the prime rate.
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|
●
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Loss
on legal settlements decreased 34.5% to $81,832 for the FYE February 28, 2017, compared
to $125,000 for the FYE ended February 29, 2016, a decrease of $43,168. The legal settlement
for FYE February 28, 2017 involves Twelfth Child Entertainment, LLC in connection with
a License Agreement settlement for rights to air programs regarding the “Foreclosure
to Fabulous” television programming on the Company’s previously owned media
business that was sold on January 21, 2016. The Company absorbed this settlement as part
of its partnership commitment with Launch Media 360 which is an investment of the Company.
The legal settlement of $125,000 for FYE February 29, 2016, was attributable to a liability
owed by AlwaysOnVacation, Inc. (the entity we acquired on October 27, 2015 and sold on
January 23, 2016) to Ryanair, Limited. The Company assumed the liability and settled
the liability on February 26, 2016, for $125,000.
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|
●
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Gain
on sale of subsidiary decreased to zero for FYE February 28, 2017, compared to $1,082,930
for the FYE February 29, 2016, in connection with the sale of Next 1 Networks, Inc. and
AlwaysOnVacation, Inc. on January 23, 2016.
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|
●
|
Gain
on the change in fair value of derivatives decreased to zero for FYE February 28, 2017,
compared to $287,149 for the FYE February 29, 2016, primarily due to a reduction in the
number of convertible promissory notes containing embedded derivatives for valuation.
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●
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Loss
on inducement to convert preferred stock decreased to zero for the FYE February 28, 2017,
compared to $1,392,666 for the FYE February 29, 2016, primarily due to loss in value
of the investment in RealBiz. The value of Series A Preferred Stock and common stock
shares in RealBiz held by the Company was reduced to the realizable value of $0.
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|
●
|
Loss
on settlement of debt decreased to zero for FYE February 28, 2017, compared to $478,956
for the FYE February 29, 2016.
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|
●
|
Other
income increased over 100% to income of $582 for FYE February 28, 2017, compared to other
expense of $10,400 for the FYE February 29, 2016.
|
Net
Income (Loss)
We
had a net loss of $7,097,275 for the FYE February 28, 2017, compared to a net loss of $4,550,484 for the FYE February 29,
2016, an increase of $2,546,791. The increase in net loss was primarily attributable to amortization of three
non-performing platforms (amounting to $1,779,820) and professional fees of $653,588 related to RealBiz litigation (see Item
3. Legal Proceedings) that were principally offset by a decrease in salaries and benefits of $268,100 (as personnel were
reduced and we relied more on third party vendors) and the decrease of loss on settlement of debt of $478,956.
Contractual
Obligations.
The following schedule represents obligations and commitments on the part of the Company that are not included
in liabilities:
|
|
Current
|
|
Long Term
|
|
|
|
|
FYE 2017
|
|
FYE 2018
|
|
FYE 2019
and
beyond
|
|
Totals
|
Office Lease
|
|
$
|
80,742
|
|
|
$
|
68,959
|
|
|
$
|
—
|
|
|
$
|
149,701
|
|
Other
|
|
|
4,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
|
Totals
|
|
$
|
85,242
|
|
|
$
|
68,959
|
|
|
$
|
—
|
|
|
$
|
154,201
|
|
Liquidity
and Capital Resources; Going Concern
At
FYE February 28, 2017, we had $1,007,065 of cash on-hand, an increase of $869,121 from $137,944 at FYE February 29, 2016.
The increase in cash was due primarily to the increase in cash raised through financing activities of $5,292,438 which was
offset by the increase in cash used in operating activities of $3,737,903 and an increase of $685,414 in connection with the
development costs of the NextTrip website.
As
of February 28, 2017, the Company had total current liabilities of $3,018,467, consisting of other notes payable in the form of
a Line of Credit facility of $1,200,000 from Republic Bank (described below) of which $1,193,000 was drawn (an increase from $15,919
as of February 29, 2016), accounts payable of $262,493 (a decrease from $588,513 as of February 29, 2016), convertible promissory
notes of $1,409,326 (a decrease from $1,658,908 as of February 29, 2016), and notes payable – current portion of zero versus
$711,784 as of February 29, 2016. We anticipate that we will satisfy these amounts from proceeds derived from equity sales, conversions
to equity securities and revenue generated from sales.
As
of February 28, 2017, we had $2.6 million in total assets, $3.0 million in total liabilities, a working capital deficit of $1.2
million and a total accumulated deficit of $100.7 million.
Net
cash used in operating activities was $3,737,903 for the FYE February 28, 2017, an increase of $1,616,548 from cash used in
operating of $2,121,355 during the FYE February 29, 2016. This change was primarily due to our net loss.
Net
cash used in investing activities increased to $685,414 for the FYE February 28, 2017, an increase of $653,340 from $32,074
of cash used in investing activities during the FYE February 29, 2016. The change is due to the isolated website development
costs from the prior year.
Net
cash provided by financing activities increased to $5,292,438, for the FYE February 28, 2017, an increase of $3,227,477 from
cash provided by financing activities of $2,064,961 for the FYE February 29, 2016. This increase was primarily due to sales
of warrants and stock, exercises of common stock warrants and draw downs on the line of credit (described below).
On
June 15, 2016, we entered into a revolving line of credit agreement with Republic Bank, Inc. of Duluth, Minnesota, in the maximum
amount of $1,000,000. Amounts borrowed under the line of credit accrue interest at the Wall Street Journal U.S. Prime Rate plus
1% (updated daily until maturity), payable monthly in arrears beginning on July 15, 2016. Any amounts borrowed under the line
of credit are due on June 15, 2017. Amounts borrowed under the line of credit are planned to be used for marketing initiatives,
working capital and to repay $300,000 previously borrowed from the Donald P. Monaco Insurance Trust, of which Donald Monaco, a
Director of the Company, is the Trustee. The loan contains standard and customary events of default. On December 22, 2016, the
revolving line of credit was increased to $1,200,000; all terms of the revolving line of credit remain unchanged. As of February
28, 2017, $1,193,000 was outstanding under the line of credit.
Our
outstanding convertible promissory notes and notes payable are described in “Note 7 – Convertible Promissory
Notes”, “Note 8 – Notes Payable”, and “Note 9 – Other Notes Payable”, to
the consolidated audited financial statements beginning on page F-1 herein.
The
growth and development of our business will require a significant amount of additional working capital. We currently have limited
financial resources and based on our current operating plan, we will need to raise additional capital in order to continue as
a going concern. We currently do not have adequate cash to meet our short or long-term objectives. In the event additional capital
is raised, it may have a dilutive effect on our existing stockholders.
We
have very limited financial resources. We currently have a monthly cash requirement of approximately $300,000, exclusive of capital
expenditures. We will need to raise substantial additional capital to support the on-going operation and increased market penetration
of our products including the development of national advertising relationships, increases in operating costs resulting from additional
staff and office space until such time as we generate revenues sufficient to support itself. We believe that in the aggregate,
we could require several millions of dollars to support and expand the marketing and development of our travel products, repay
debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space
and systems for managing the business, and cover other operating costs until our planned revenue streams from travel products
are fully-implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working
capital needs on acceptable terms, or at all, will negatively impact our business, financial condition and liquidity. As of February
28, 2017, we had approximately $3.0 million of current liabilities (similar to the $3 million of current liabilities as of February
29, 2016). We currently do not have the resources to satisfy these obligations, and our inability to do so could have a material
adverse effect on our business and ability to continue as a going concern.
To
date, we have funded our operations with the proceeds from the private equity and debt financings and we anticipate we will continue
to meet our funding requirements through the sale of equity or debt financing, which funds may not be available on favorable terms,
if at all. We anticipate that we would need several millions of dollars to properly market our products and fund the operations
for the next 12 months. Assuming we are able to raise the funds discussed above, we anticipate that by the fourth fiscal quarter
of FYE February 28, 2018, our operations will be self-sustaining and providing the necessary cash flow to enable us to continue
to grow the Company.
Critical
Accounting Policies and Estimates
Our
consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The preparation
of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions.
To the extent there are material differences between these estimates and our actual results, our consolidated financial statements
will be affected.
Our
significant accounting policies are described in Note 2 - Summary of Significant Accounting Policies to the accompanying consolidated
financial statements.
The
methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations.
We believe that the policies listed below involve the greatest degree of complexity and judgment by our management and are critical
for understanding and evaluating our financial condition and results of operations. If actual results significantly differ from
the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.
Revenue
Recognition
We
recognize revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of
cancellation has expired, the sales price is fixed or determinable and collectability is reasonably assured.
Revenue
for customer travel packages purchased directly from the Company are recorded gross (the amount paid to the Company by
the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of
revenues).
We
generate our revenues from sales directly to customers as well as through other distribution channels of tours and activities
at destinations throughout the world as well as from customers for online advertising services related to the listing of their
properties for rent, primarily on a subscription basis, over a fixed-term. We also generate revenue from commissions on bookings
or traveler inquiries on our performance-based listings. Additional revenues are derived from the sales of ancillary products
and services.
Payments
for tours or activities and term-based paid subscriptions received in advance of services being rendered are recorded as deferred
revenue and recognized ratably on a straight-line basis over the listing period. Revenue for performance-based listings is calculated
as a percentage of the traveler booking or a fixed fee-per-inquiry stated in the arrangement and recognized when the service has
been performed or as the customer’s refund privileges lapse.
Business
Combinations
The
purchase prices of acquired businesses or acquired assets have been allocated to the tangible and intangible assets acquired and
liabilities assumed, based upon their estimated fair value at the date control is obtained. The difference between the purchase
price and the fair value of the net assets acquired is recorded as goodwill.
Most
of the businesses we have acquired did not have a significant amount of tangible assets. We typically identified the following
identifiable intangible assets in each acquisition: trade name, customer relationships and internal software. In making certain
assumptions on valuation and useful lives, we considered the unique nature of each acquired asset.
Determining
the estimated fair value of assets involves the use of significant estimates, judgment and assumptions, such as future cash flows
and selection of comparable companies. Future changes in our assumptions or the interrelationship of those assumptions may negatively
impact future valuations and could result in an impairment of goodwill or intangible assets that may have a material effect on
our financial condition and operating results.
Definite-lived
intangible assets are recorded at cost and amortized using a method that reflects our best estimate of the pattern in which the
economic benefit of the related intangible asset is utilized.
Goodwill
and indefinite-lived intangible assets, such as certain trade names, are not amortized and are subject to annual impairment tests
during the fourth quarter, or whenever events or circumstances indicate impairment may have occurred. For goodwill and indefinite
lived intangible assets, we complete a quantitative analysis that compares the fair value of our reporting unit or indefinite-lived
intangible assets to the carrying amounts, and an impairment loss is recognized equivalent to the excess of the carrying amount
over the fair value.
Accounts
Receivable
We
extend credit to our customers in the normal course of business. Further, we regularly review outstanding receivables, and
provide for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss
reserves, we make judgments regarding our customers’ ability to make required payments, economic events and other
factors. As the financial condition of these parties change, circumstances develop or additional information becomes
available, adjustments to the allowance for doubtful accounts may be required. We maintain reserves for potential credit
losses, and such losses traditionally have been within our expectations. As of February 28, 2017 and February 29, 2016, we
had no accounts receivable, therefore, our allowance for doubtful accounts was $0.
Impairment
of Long-Lived Assets
In
accordance with Accounting Standards Codification 360-10, “Property, Plant and Equipment”, we periodically review
our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be fully recoverable. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated
fair value and its book value. As of February 28, 2017, we did not impair any long-lived assets.
Website
Development Costs
We
account for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”.
Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and
infrastructure development stage that meet specific criteria are capitalized subject to straight-line amortization over a three-year
period and costs incurred in the day to day operation of the website are expensed as incurred.
Goodwill
and Other Intangible Assets
In
accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, we assess the impairment of identifiable intangible
assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider
important, which could trigger an impairment review include the following:
1.
Significant underperformance to historical or projected future operating results;
2.
Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
we determine that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of
the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flow,
we record an impairment charge. We measure any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment
is required in determining whether an indicator of impairment exists and in projecting cash flows. We evaluated the remaining
useful life of the intangibles and did not record an impairment of intangible assets during the years ended February 28, 2017
and February 29, 2016.
Intellectual
properties that have finite useful lives are amortized over their useful lives. We incurred amortization expense of $1,779,820
and $164,615 for the years ended February 28, 2017 and February 29, 2016, respectively, which is included in general and administrative
expenses.
Convertible
promissory notes
We
have issued and outstanding convertible promissory senior notes in the amount of $1.409 million. Upon issuance, we separated the
Notes into liability and equity components. We record debt net of debt discount for beneficial conversion features and warrants,
on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics
of the FASB Accounting Standards Codification. The carrying amount of the liability component was calculated by measuring the
fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component
representing the conversion option was determined by deducting the fair value of the liability component from the par value of
the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”)
is amortized to interest expense over the term of the Notes using the effective interest rate method. The equity component is
not re-measured as long as it continues to qualify for equity classification.
In
accounting for the transaction costs related to the Note issuance, we allocated the total amount incurred to the liability and
equity components based on their relative values. Transaction costs attributable to the liability component are being amortized
to expense over the term of the Notes using the effective interest rate method, and transaction costs attributable to the equity
component were netted with the equity component in stockholders’ equity.
Derivative
Instruments
We
enter into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded
derivative features. We account for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting
for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard.
In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and
are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely
related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a
gain or loss in earnings. We determine the fair value of derivative instruments and hybrid instruments based on available market
data using appropriate valuation models, considering all of the rights and obligations of each instrument.
We
estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered
consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors,
the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative
instruments, such as freestanding warrants, we generally use the Black-Scholes model, adjusted for the effect of dilution, because
it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary
to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant
and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal
and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive
to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently
carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes.
Under the terms of the new accounting standard, increases in the trading price of our common stock and increases in fair value
during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading
price of our common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash
derivative income.
Based
upon ASC 815-25 the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible
debentures. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.
Stock-Based
Compensation
We
have stock-based compensation plans which allow for the issuance of stock-based awards, including stock options, restricted stock
units and restricted stock awards. We compute share based payments in accordance with Accounting Standards Codification 718-10
“Compensation” (ASC 718-10). ASC 718-10 establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods and services at fair value, focusing primarily on accounting for transactions in which
an entity obtains employees services in share-based payment transactions. It also addresses transactions in which an entity incurs
liabilities in exchange for goods and services that are based on the fair value of an entity’s equity instruments or that
may be settled by the issuance of those equity instruments.
SAB
No. 107, Share-Based Payment (“SAB 107”) provides guidance regarding the interaction of ASC 718-10 and certain SEC
rules and regulations. We have applied the provisions of SAB 107 in its adoption of ASC 718-10. We account for stock-based compensation
expense by amortizing the fair value of each stock-based award expected to vest over the requisite service or performance period.
The fair value of restricted stock awards is based on the number of shares granted and the closing price of our common stock on
the date of grant. The fair value of each stock option award is calculated on the date of grant using the Black-Scholes option-pricing
model.
The
Black-Scholes model requires various assumptions including fair value of the underlying stock, volatility, expected term, risk-free
interest rate and expected dividends. We use our historical experience to estimate the expected forfeiture rate of awards, and
only recognize expense for those awards expected to vest. To the extent the actual forfeiture rate is different from the estimate,
the stock-based compensation expense is adjusted accordingly. If any of the assumptions we use in estimating the fair value of
awards change significantly or the actual forfeiture rate is different than the estimate, stock-based compensation expense may
differ materially in the future.
We
have implemented all new relevant accounting pronouncements that are in effect through the date of these financial statements.
These pronouncements did not have a material impact on the financial statements and unless otherwise disclosed, we do not believe
that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial
position or results of operations.
Income
Taxes
We
account for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes” in accordance with
the liability method
,
whereby deferred tax asset and liability account balances are determined based on differences between
financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which
are included in our consolidated balance sheets. We then assess the likelihood that the deferred tax assets will be recovered
from future taxable income and the reversal of temporary taxable differences. A valuation allowance is established against deferred
tax assets to the extent we believe that recovery is not likely. Significant judgment is required in determining any valuation
allowance to be recorded. In assessing the need for a valuation allowance, we consider all available evidence, including past
operating results, estimates of future taxable income, reversals of taxable temporary differences and the feasibility of tax planning
over the periods in which the temporary differences are deductible. In the event we change our determination as to the amount
of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision
for income taxes in the period in which the determination is made.
The
difference between our effective income tax rate and the federal statutory rate is primarily a function of the mix of uncertain
tax positions and permanent differences including non-deductible charges. Our provision for income taxes is subject to volatility
and could be adversely impacted if earnings or tax rates differ from our expectations or if new tax laws are enacted.
Significant
judgment is required in evaluating any uncertain tax positions, including the timing and amount of deductions and allocations
of income among various tax jurisdictions. We are required to identify, evaluate and measure all uncertain tax positions taken
or to be taken on tax returns and to record liabilities for the amount of these positions that may not be sustained, or may only
partially be sustained, upon examination by the relevant taxing authorities. Although we believe that our estimates and judgments
are reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing
authorities. We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement
of an estimate. To the extent that the final outcome of a matter is different than the amount recorded, such differences will
impact the provision for income taxes in the period in which the determination is made. The provision for income taxes includes
the impact of reserve provisions and changes to reserves that are considered appropriate, as well as any related net interest
and penalties.
We
have adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position
is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can
be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax
positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is
not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations
remains open. As of February 28, 2017, the Company’s income tax returns for tax years ending February 29, 2016 and February
28, 2015, 2014, 2013, and 2012 remain potentially subject to audit by the taxing authorities.
We
follow the guidance of ASC 740, “Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary difference
between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes,
and (b) net operating loss carry-forwards. No current tax provision has been made in the accompanying statement of income (loss)
because no taxes are due currently or were paid previously. Similarly, no deferred tax asset attributable to the net operating
loss carry-forward has been recognized, as it is not deemed likely to be realized.
Earnings
per Share
Basic
earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock,
common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share is
not presented because it is anti-dilutive. On June 25, 2015, we effected a 1:50 reverse stock-split of all of our outstanding
shares of common stock.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk
Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this
Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item
8. Financial Statements and Supplementary Data.
Our
consolidated financial statements are contained in pages F-1 through F-35 which appear at the end of this annual report on
Form 10-K.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
We
changed our independent registered public accounting firm from D’Arelli Pruzansky, P.A. to LBB & Associates Ltd., LLP
for the year ended February 29, 2016 on March 8, 2016. There have been no disagreements with LBB & Associates Ltd., LLP or
with D’Arelli Pruzansky, P.A., within the meaning of Rule 304(b) of Regulation S-K, either in connection with the change
in accountants described above, or otherwise, during the years ended February 29, 2016 and February 28, 2015, or the period from
February 29, 2016 to the date of this filing.
Item
9A. Controls and Procedures
Disclosure
Controls and Procedures
The
Company maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange
Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and
is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. In accordance with Rule 13a-15(b) of the Exchange Act,
as of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision and
with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of
the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of February 28, 2017, the
end of the period covered by this Annual Report on Form 10-K, were not effective to provide reasonable assurance that information
required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the
supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions,
and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets
that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that our degree of compliance with
the policies or procedures may deteriorate.
Management
assessed the effectiveness of the Company’s internal controls over financial reporting as of February 28, 2017 based on
the framework in
Internal Control—Integrated Framework (COSO 2013)
issued by the Committee of Sponsoring Organization
of the Treadway Commission. On the basis of that assessment, management determined that our internal controls over financial reporting
were not effective as of that date, because we did not maintain effective controls to ensure that the financial impact of certain
transactions were accounted for properly.
Moving
forward we plan to address the material weakness described above by (a) seeking outside assistance from third parties and (b)
implementing additional disclosure controls and procedures to facilitate high level management review in order to detect material
errors in our financials.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during the quarter ended February 28, 2017 that materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations
on the Effectiveness of Controls
Our
disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance
of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures
or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how
well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its
objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud
will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
Item
9B. Other Information
On
April 18, 2017, the Board of Directors adopted charters of the Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee of the Board of the Directors, filed herewith as Exhibits 99.1, 99.2 and 99.3, respectively. The Board of
Directors appointed Mr. Pat LaVecchia (Chairman), Mr. Doug Checkeris and Mr. Robert Post, as members of the Audit Committee; Mr.
Simon Orange (Chairman) and Mr. Checkeris, as members of the Compensation Committee; and Mr. Checkeris (Chairman) and Mr. LaVecchia,
as members of the Nominating and Corporate Governance Committee.
The
Board of Directors also adopted the Whistleblower Protection Policy, a copy of which is attached hereto as Exhibit 14.3, on April
18, 2017.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
The following table and biographical summaries
set forth information, including principal occupation and business experience for at least the last five years, about our directors
and executive officers. The terms of all the directors, as identified below, will run until their successors are elected and qualified
or until their earlier resignation or removal.
Name
|
|
Age
|
|
Position
|
|
Officer and/or
Director Since
|
William Kerby
|
|
59
|
|
Chief Executive Officer and Chairman
|
|
2008
|
|
|
|
|
|
|
|
Omar Jimenez
|
|
55
|
|
Chief Financial Officer, Chief Operating Officer and Director
|
|
2016
|
|
|
|
|
|
|
|
Pat LaVecchia
|
|
50
|
|
Director
|
|
2011
|
|
|
|
|
|
|
|
Donald P. Monaco
|
|
64
|
|
Director
|
|
2012
|
|
|
|
|
|
|
|
Doug Checkeris
|
|
61
|
|
Director
|
|
2012
|
|
|
|
|
|
|
|
Simon Orange
|
|
49
|
|
Director
|
|
2017
|
|
|
|
|
|
|
|
Robert Post
|
|
56
|
|
Director
|
|
2017
|
Management and Director Biographies:
William Kerby – Chief Executive Officer
and Chairman
William Kerby is the Founder, Chairman and CEO
of Monaker Group, Inc. From July 2008 to present, he has been the architect of the Monaker model, overseeing the development and
operations of the Company’s Travel, Real Estate and Television Media divisions. In October 2012, Monaker transferred its
real estate assets into a public company - RealBiz Media Group, Inc., where Mr. Kerby served as CEO until August 2015 and on the
Board until April of 2016. In July 2015 the decision was made to separate the Television and Real Estate operations from Monaker
thereby allowing management to focus all efforts on the development of its travel operations. From April 2002 to July 2008, Mr.
Kerby served as the CEO of various media and travel entities that ultimately became part of Extraordinary Vacations Group. Operations
included Cruise & Vacation Shoppes, Maupintour Extraordinary Vacations, Attaché Travel and the Travel Magazine - a TV
series of 160 travel shows. From February 1999 to April 2002, Mr. Kerby founded and managed
Travelbyus,
a publicly traded
company on the TSX and NASD Small Cap. The launch included an intellectually patented travel model that utilized technology-based
marketing to promote its travel services and products. Mr. Kerby negotiated the acquisition and financing of 21 companies encompassing
multiple tour operators, 2,100 travel agencies, media that included print, television, outdoor billboard and wireless applications
and leading edge technology in order to build and complete the
Travelbyus
model. The company had over 500 employees, gross
revenues exceeding $3 billion and a Market Cap over $900 million. From June 1989 to January 1999, Mr. Kerby founded and grew Leisure
Canada – a company that included the Master Franchise for Thrifty Car Rental British Columbia, TravelPlus (a nationwide Travel
Agency), Bluebird Holidays (an international tour company with operations in the U.S., Canada, Great Brittan, France, South Africa
and the South Pacific) and Canadian Traveler (a travel magazine). Leisure Canada was acquired in May 1998 by Wilton Properties,
a Canadian company developing hotel and resort properties in Cuba. From October 1980 through June 1989, Mr. Kerby worked in the
financial industry as an investment advisor. Mr. Kerby graduated from York University in May 1980 with a Specialized Honors Economics
degree. We selected Mr. Kerby to serve on our Board because he brings to the board extensive knowledge of the travel industry.
Having served in senior corporate positions in many travel related companies, he has a vast knowledge of the industry.
Omar Jimenez - Chief Financial Officer, Chief
Operating Officer & Director
In January 2017, the Board of Directors of the
Company appointed Omar Jimenez as a member of the Board of Directors. In January 2016, the Board of Directors of the Company appointed
Omar Jimenez, to the position of Chief Financial Officer and Chief Operating Officer of the Company. Mr. Jimenez has held a variety
of senior financial management positions during his career. From September 2012 to January 2016, he served as the founder of MARMEL
International, Inc., a company that provides accounting and consulting services. In addition, from May 2009 to September 2012,
he worked as Chief Financial Officer of EpiCenter Development Associates, LLC, a real estate developer with combined projects amounting
to $6 billion, and from June 2004 to May 2009 he served as President & Chief Financial Officer at American Leisure Holdings,
Inc., focusing on leisure and business travel, hospitality & hotels, call centers and real estate development. Mr. Jimenez
also served from April 2002 to June 2004 as Director of Operations for US Installation Group, Inc., a selling and installation
group for The Home Depot, and CFO and VP of Onyx Group, Inc., a conglomerate with 700 employees and annual revenues exceeding $400
million. Mr. Jimenez is a Certified Public Accountant (CPA), Chartered Global Management Accountant (CGMA), Chartered Property
Casualty Underwriter (CPCU), a Member of the AICPA and FICPA. Mr. Jimenez holds a B.B.A in Accounting and a B.B.A in Finance from
the University of Miami and an M.B.A from Florida International University.
Pat LaVecchia – Director
Pat LaVecchia has served as a member of the Board
of Directors since 2011. Mr. LaVecchia has been a founding principal and Managing Member of LaVecchia Capital LLC (“LaVecchia
Capital”), a merchant banking and investment firm, since 2007 and has over 20 years of experience in the financial industry.
Mr. LaVecchia has built and run several major Wall Street groups and has extensive expertise in capital markets, including initial
public offerings, secondary offerings, raising capital for private companies and PIPEs as well as playing the leading role in numerous
mergers, acquisitions, private placements and high yield transactions. Prior to forming LaVecchia Capital, Mr. LaVecchia ran several
groups at major firms including: Managing Director and Head of the Private Equity Placement Group at Bear, Stearns & Company
(1994 to 1997); Group Head of Global Private Corporate Equity Placements at Credit Suisse First Boston (1997 to 2000); Managing
Director and Group Head of the Private Finance and Sponsors Group at Legg Mason Wood Walker, Inc (2001 to 2003); co-founder and
Managing Partner of Viant Group (2003-2005) and Managing Director and Head of Capital Markets at FTN Midwest Securities Corp. (2005
to 2007). Mr. LaVecchia received his B.A., magna cum laude (and elected to Phi Beta Kappa), from Clark University and an M.B.A.
from The Wharton School of the University of Pennsylvania with a major in Finance and a concentration in Strategic Planning. In
the past, Mr. LaVecchia has served on several public company boards, including as Vice Chairman of InfuSystems, Inc. (INFU). Mr.
LaVecchia also served on the RealBiz Media Group, Inc. Board of Directors from April 2014 until April 2016. Mr. LaVecchia
is also currently a managing partner of Sapphire Capital Management. Mr. LaVecchia also sits on several advisory boards and non-profit
boards. The Company believes that Mr. LaVecchia’s investment banking and business experience allows him to contribute business
and financing expertise and qualifies him to be a member of the Board.
Donald P. Monaco - Director
Donald P. Monaco has served as a member
of the Board of Directors since August 2011. Mr. Monaco served on the RealBiz Media Group, Inc. Board of Directors from
October 2012 until April 2016. Mr. Monaco is the principal owner of Monaco Air Duluth, LLC, a full service, fixed-base
operator aviation services business at Duluth International Airport serving airline, military and general aviation customers
since November 2005; a partner in Lark O’ the Lake, LLC since April 2015; and the principal owner of the Duluth Flying
Club, LLC since May 2015. Mr. Monaco also serves as a Commissioner on the Metropolitan Airports Commission in
Minneapolis-St. Paul and is a Director at Republic Bank in Duluth, Minnesota. Mr. Monaco is the President and Chairman
of the Monaco Air Foundation, Treasurer of Honor Flight Northland, Treasurer of the Duluth Aviation Institute, and a member
of the Duluth Chamber of Commerce Military Affairs Committee. Mr. Monaco spent over 18 years as a Partner and Senior
Executive and has 28 years as an international information technology and business management consultant with Accenture in
Chicago, Illinois. We selected Mr. Monaco to serve on our Board because he brings a strong business background to
the Company, and adds significant strategic, business and financial experience. Mr. Monaco’s business background
provides him with a broad understanding of the issues facing us, the financial markets and the financing opportunities
available to us.
Doug Checkeris - Director
Doug Checkeris has served as a member of the Board
of Directors since September 2012. Mr. Checkeris also served as the Company’s Chief Marketing Officer from February 2012
to February 2014. Mr. Checkeris is a Senior Media and Advertising Executive with nearly three decades of hands-on management in
all facets of interactive media. Mr. Checkeris’s work experience includes 14 years of service with Mediacom where he rose
through the ranks to become the CEO for Mediacom North America, until recently headquartered in New York. With close to $18 billion
in global billings, 4,600 employees, and 116 offices in 89 countries, Mediacom provides and specializes in business-building media
solutions for some of the world’s largest, well-known advertisers. Previous to Mediacom, Doug started his career in a media
company in Toronto, Canada, and was a partner when the company was acquired by Grey Worldwide and the WPP. Mr. Checkeris served
on the RealBiz Media Group, Inc. Board of Directors from October 2012 until April 2016. We selected Mr. Checkeris to serve
on our Board because he brings to the board extensive knowledge of the media industry. Having served in senior corporate positions
in many media related companies he has a vast knowledge of the industry.
Simon Orange - Director
Simon Orange has served as a member of the Board
of Directors since January 2017. Mr. Orange is the founding partner and chairman of CorpAcq, a corporate acquisitions and investments
company located in the United Kingdom. Mr. Orange served as the chairman of CorpAcq from 2006 to 2009 and from April 2014 to present.
At CorpAcq, Mr. Orange is responsible for identifying and negotiating acquisitions in conjunction with its corporate finance partners,
as well as overseeing strategic development, funding, and partnerships. Following a “buy and build” approach, CorpAcq
maintains long-term investments in a diverse portfolio of successful businesses. Currently comprised of 19 portfolio companies,
CorpAcq has been recognized as one of the fastest growing enterprises in the United Kingdom. Mr. Orange has been involved in funding
and managing the growth of numerous business ventures, some which have been acquired by NASDAQ and London Stock Exchange listed
companies. He is also a founding member of Cicero Consulting Group, based in New York City.
Robert J. Post - Director
Robert J. Post has served as a member of the Board
of Directors since January 2017. Mr. Post has served as Chief Executive Officer of Cloud5, the largest provider of cloud based
telecommunications and high speed Internet to major brands in the hospitality industry, including Marriott, IHG, Hilton, La Quinta,
Motel 6 and Red Roof Inn, since January 2015. He has also served as a member of the Board of Directors of Cloud5 since January
2015. Mr. Post has served as the Executive Chairman of The Knowland Group, a hospitality and data analytics company since March
2014. From 2005 to December 2011, Mr. Post served as Chairman, Chief Executive Officer and Chief Financial Officer of TravelClick,
a leading provider of global, hotel e-commerce solutions that supports more than 15,000 customers across 140 countries, including
Blackstone, Hilton, Hyatt, Accor, Marriott and Trump. He also previously served as executive and corporate officer at MICROS Systems,
a hospitality technology provider, where he helped lead its secondary NASDAQ offering. Since 2002, Mr. Post has also operated Pconsulting,
providing start-up investment and restructuring services for mid-sized businesses, including OpenTable.com, HotelBank, and Radiant
Systems. Mr. Post served as a member of the Board of Directors of Avatech Solutions, a publicly reporting company, and served on
the Compensation and Audit Finance Committee of that entity, from March 2004 to October 2010. He is a graduate of Wharton’s
Advanced Management Program, and earned his Bachelor’s of Science in Business from Duquesne University.
Family Relationships amongst Directors and Officers:
There are no family relationships among our directors,
executive officers, or persons nominated or chosen by the Company to become directors or executive officers.
Arrangements between Officers and Directors
To our knowledge, there is no arrangement or understanding
between any of our officers and any other person, including directors, pursuant to which the officer was selected to serve as an
officer.
Involvement in Certain Legal Proceedings
None of our executive officers or directors has
been involved in any of the following events during the past ten years: (1) any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior
to that time; (2) any conviction in a criminal proceeding or being a named subject to a pending criminal proceeding (excluding
traffic violations and minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; (4) being found by a court of competent jurisdiction
(in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities
law; (5) being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding,
not subsequently reversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities or commodities
law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies, including, but not limited
to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist
order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with
any business entity; or (6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or
vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined
in Section (1a)(40) of the Commodity Exchange Act), or any equivalent exchange, association, entity, or organization that has disciplinary
authority over its members or persons associated with a member.
Committees of the Board of Directors
Board Committee Membership
|
|
Independent
|
|
Audit Committee
|
|
Compensation Committee
|
|
Nominating and
Corporate
Governance
Committee
|
William Kerby (1)
|
|
|
|
|
|
|
|
|
Omar Jimenez
|
|
|
|
|
|
|
|
|
Pat LaVecchia
|
|
X
|
|
C
|
|
|
|
M
|
Donald P. Monaco
|
|
|
|
|
|
|
|
|
Doug Checkeris
|
|
X
|
|
M
|
|
M
|
|
C
|
Simon Orange
|
|
X
|
|
|
|
C
|
|
|
Robert Post
|
|
X
|
|
M
|
|
|
|
|
(1) Chairman of Board of Directors.
C - Chairman of Committee.
M - Member.
The charter for each committee of the Board identified
below is available on our website at www.monakergroup.com. Copies of the committee charters are also available for free upon
written request to our Corporate Secretary. Additionally, the committee charters are filed as exhibits to this Annual
Report on Form 10-K.
Audit Committee
The Audit Committee, which is comprised exclusively
of independent directors, has been established by the Board to oversee our accounting and financial reporting processes and the
audits of our financial statements.
The Board has selected the members of the Audit
Committee based on the Board’s determination that the members are financially literate (as required by NASDAQ rules) and
qualified to monitor the performance of management and the independent auditors and to monitor our disclosures so that our disclosures
fairly present our business, financial condition and results of operations.
The Board has also determined that Mr. Post, is
an “audit committee financial expert” (as defined in the SEC rules) because he has the following attributes: (i) an
understanding of generally accepted accounting principles in the United States of America (“GAAP”) and financial statements;
(ii) the ability to assess the general application of such principles in connection with accounting for estimates, accruals and
reserves; (iii) experience analyzing and evaluating financial statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our
financial statements; (iv) an understanding of internal control over financial reporting; and (v) an understanding of audit committee
functions. Mr. Post has acquired these attributes by means of having held various positions that provided relevant experience,
as described in his biographical above.
The Audit Committee has the sole authority, at
its discretion and at our expense, to retain, compensate, evaluate and terminate our independent auditors and to review, as it
deems appropriate, the scope of our annual audits, our accounting policies and reporting practices, our system of internal controls,
our compliance with policies regarding business conduct and other matters. In addition, the Audit Committee has the authority,
at its discretion and at our expense, to retain special legal, accounting or other advisors to advise the Audit Committee.
The Audit Committee was formed on April 18, 2017.
The Audit Committee Charter is filed as Exhibit
99.1 to this Annual Report on Form 10-K.
Compensation Committee
The Compensation Committee, which is comprised
exclusively of independent directors, is responsible for the administration of our stock compensation plans, approval, review and
evaluation of the compensation arrangements for our executive officers and directors and oversees and advises the Board on the
adoption of policies that govern the Company’s compensation and benefit programs. In addition, the Compensation Committee
has the authority, at its discretion and at our expense, to retain special legal, accounting or other advisors to advise the Compensation
Committee.
The Compensation Committee was formed on April
18, 2017.
The Compensation Committee Charter is filed as
Exhibit 99.2 to this Annual Report on Form 10-K.
Nominating and Governance Committee
The Nominating and Governance Committee, which
is comprised exclusively of independent directors, is responsible for identifying prospective qualified candidates to fill vacancies
on the Board, recommending director nominees (including chairpersons) for each of our committees, developing and recommending appropriate
corporate governance guidelines and overseeing the self-evaluation of the Board.
In considering individual director nominees and
Board committee appointments, our Nominating and Governance Committee seeks to achieve a balance of knowledge, experience and capability
on the Board and Board committees and to identify individuals who can effectively assist the Company in achieving our short-term
and long-term goals, protecting our stockholders’ interests and creating and enhancing value for our stockholders. In so
doing, the Nominating and Governance Committee considers a person’s diversity attributes (e.g., professional experiences,
skills, background, race and gender) as a whole and does not necessarily attribute any greater weight to one attribute. Moreover,
diversity in professional experience, skills and background, and diversity in race and gender, are just a few of the attributes
that the Nominating and Governance Committee takes into account. In evaluating prospective candidates, the Nominating and Governance
Committee also considers whether the individual has personal and professional integrity, good business judgment and relevant experience
and skills, and whether such individual is willing and able to commit the time necessary for Board and Board committee service.
While there are no specific minimum requirements
that the Nominating and Governance Committee believes must be met by a prospective director nominee, the Nominating and Governance
Committee does believe that director nominees should possess personal and professional integrity, have good business judgment,
have relevant experience and skills, and be willing and able to commit the necessary time for Board and Board committee service.
Furthermore, the Nominating and Governance Committee evaluates each individual in the context of the Board as a whole, with the
objective of recommending individuals that can best perpetuate the success of our business and represent stockholder interests
through the exercise of sound business judgment using their diversity of experience in various areas. We believe our current directors
possess diverse professional experiences, skills and backgrounds, in addition to (among other characteristics) high standards of
personal and professional ethics, proven records of success in their respective fields and valuable knowledge of our business and
our industry.
The Nominating and Governance Committee uses a
variety of methods for identifying and evaluating director nominees. The Nominating and Governance Committee also regularly assesses
the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or other circumstances.
In addition, the Nominating and Governance Committee considers, from time to time, various potential candidates for directorships.
Candidates may come to the attention of the Nominating and Governance Committee through current Board members, professional search
firms, stockholders or other persons. These candidates may be evaluated at regular or special meetings of the Nominating and Governance
Committee and may be considered at any point during the year.
The Committee evaluates director nominees at regular
or special Committee meetings pursuant to the criteria described above and reviews qualified director nominees with the Board.
The Committee selects nominees that best suit the Board’s current needs and recommends one or more of such individuals for
election to the Board.
The Committee will consider candidates recommended
by stockholders, provided the names of such persons, accompanied by relevant biographical information, and other information as
required by the Company’s Bylaws, are properly submitted in writing to the Secretary of the Company in accordance with the
Bylaws and applicable law. The Secretary will send properly submitted stockholder recommendations to the Committee. Individuals
recommended by stockholders in accordance with these procedures will receive the same consideration received by individuals identified
to the Committee through other means. The Committee also may, in its discretion, consider candidates otherwise recommended by stockholders
without accompanying biographical information, if submitted in writing to the Secretary.
The Nominating and Governance Committee was formed
on April 18, 2017.
The Nominating and Governance Committee Charter
is filed as Exhibit 99.3 to this Annual Report on Form 10-K.
Board Leadership Structure
Our Board of Directors has the responsibility for
selecting the appropriate leadership structure for the Company. In making leadership structure determinations, the Board of Directors
considers many factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders.
Our current leadership structure is comprised of a combined Chairman of the Board and Chief Executive Officer (“CEO”),
Mr. Kerby. The Board of Directors believes that this leadership structure is the most effective and efficient for the Company at
this time. Mr. Kerby possesses detailed and in-depth knowledge of the issues, opportunities, and challenges facing the Company,
and is thus best positioned to develop agendas that ensure that the Board of Directors’ time and attention are focused on
the most critical matters. Combining the Chairman of the Board and CEO roles promotes decisive leadership, fosters clear accountability
and enhances the Company’s ability to communicate its message and strategy clearly and consistently to our stockholders,
particularly during periods of turbulent economic and industry conditions. The Board believes that its programs for overseeing
risk, as described below, would be effective under a variety of leadership frameworks and therefore do not materially affect its
choice of structure.
Risk Oversight
Effective risk oversight is an important priority
of the Board of Directors. Because risks are considered in virtually every business decision, the Board of Directors discusses
risk throughout the year generally or in connection with specific proposed actions. The Board of Directors’ approach to risk
oversight includes understanding the critical risks in the Company’s business and strategy, evaluating the Company’s
risk management processes, allocating responsibilities for risk oversight, and fostering an appropriate culture of integrity and
compliance with legal responsibilities. The directors exercise direct oversight of strategic risks to the Company.
Board of Directors Meetings
During the fiscal year that ended on February 28,
2017, the Board took all actions via the unanimous written consent of the Board of Directors; provided that the Board did confer
on a regular, frequent and informal basis throughout the year. All directors attended at least 75% of the Board of Directors meetings
during FYE February 28, 2017.
Stockholder Communications with the Board
In connection with all other matters other than
the nomination of members of our Board of Directors (as described above), our stockholders and other interested parties may communicate
with members of the Board of Directors by submitting such communications in writing to our Secretary, 2690 Weston Road, Suite 200,
Weston, Florida 33331, who, upon receipt of any communication other than one that is clearly marked “Confidential,”
will note the date the communication was received, open the communication, make a copy of it for our files and promptly forward
the communication to the director(s) to whom it is addressed. Upon receipt of any communication that is clearly marked “Confidential,”
our Secretary will not open the communication, but will note the date the communication was received and promptly forward the communication
to the director(s) to whom it is addressed. If the correspondence is not addressed to any particular member of the Board of Directors,
the communication will be forwarded to a Board member to bring to the attention of the Board.
Code of Ethics
We maintain a Code of Ethics and Code of Business
Conduct, which are applicable to all of our directors, officers and employees. These codes set forth ethical standards to which
these persons must adhere and other aspects of accounting, auditing and financial compliance, as applicable. We undertake to provide
a printed copy of these codes free of charge to any person who requests. Any such request should be sent to our principal executive
offices attention: Chief Operating Officer.
We intend to disclose any amendments to our Code
of Ethics and Code of Business Conduct and any waivers with respect to our Code of Ethics and Code of Business Conduct granted
to our principal executive officer, our principal financial officer, or any of our other employees performing similar functions
on our website at www.monakergroup.com, within four business days after the amendment or waiver. In such case, the disclosure regarding
the amendment or waiver will remain available on our website for at least 12 months after the initial disclosure. There have been
no waivers granted with respect to our Code of Ethics and Code of Business Conduct to any such officers or employees to date.
Whistleblower Protection Policy
On April 18, 2017, the Company adopted a Whistleblower
Protection Policy (“Whistleblower Policy”) that applies to all of its directors, officers, employees, consultants,
contractors and agents of the Company. The Whistleblower Policy has been reviewed and approved by the Board. The Company’s
Whistleblower Policy is filed as Exhibit 14.3 to this Annual Report on Form 10-K.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires our
directors and officers, and persons who beneficially own more than 10% of a registered class of the Registrant’s equity securities,
to file reports of beneficial ownership and changes in beneficial ownership of our securities with the SEC on Forms 3, 4 and 5.
Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file.
Based solely upon our review of the Section 16(a)
filings that have been furnished to us and representations by our directors and executive officers (where applicable), we believe
that all filings required to be made under Section 16(a) during FYE February 28, 2017 were timely made, except that Donald P. Monaco,
our director, inadvertently failed to timely report five transactions on Form 4; Pat LaVecchia, our director, inadvertently failed
to timely report one transaction on Form 4; Mark Wilton, a greater than 10% shareholder of the Company, failed to timely report
nine transactions on Form 4; Simon Orange, our director, inadvertently failed to timely file a Form 3 and to timely report two
transactions on Form 4, and Robert J. Post, our director, inadvertently failed to timely file a Form 3 and to timely report one
transaction on Form 4.
Pursuant to SEC rules, we are not required to disclose
in this filing any failure to timely file a Section 16(a) report that has been disclosed by us in a prior annual report or proxy
statement.
Item 11. Executive Compensation
DIRECTOR AND OFFICER COMPENSATION
The following table sets forth certain information
concerning compensation earned by or paid to certain persons who we refer to as our “Named Executive Officers” for
services provided for the fiscal years ended February 28, 2017 and February 29, 2016 (Fiscal 2017 and Fiscal 2016, respectively).
Our Named Executive Officers include persons who (i) served as our principal executive officer or acted in a similar capacity during
Fiscal 2017 and 2016, (ii) were serving at fiscal year-end as our two most highly compensated executive officers, other than the
principal executive officer, whose total compensation exceeded $100,000, and (iii) if applicable, up to two additional individuals
for whom disclosure would have been provided as a most highly compensated executive officer, but for the fact that the individual
was not serving as an executive officer at fiscal year-end.
Name and
Principal
Position
|
|
Fiscal
Year
Ended
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards (a)
|
|
|
Option
Awards
|
|
|
Non-Equity
Inventive Plan
Compensation
|
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
William Kerby, CEO and Chairman of the Board (1), (3), (5), (6)
|
|
2017
|
|
|
$
|
306,250
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
39,600
|
|
|
$
|
345,850
|
|
|
|
2016
|
|
|
$
|
300,000
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
39,600
|
|
|
$
|
339,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Omar Jimenez, CFO, COO and Director (2), (4)
|
|
2017
|
|
|
$
|
231,250
|
|
|
$
|
-0-
|
(7)
|
|
$
|
250,000
|
(7)
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
481,250
|
|
|
|
2016
|
|
|
$
|
29,167
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
29,167
|
|
(a)
|
The value of the Stock Awards in the table above was
calculated based on the fair value of such securities calculated in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718.
|
(1)
|
William Kerby is the CEO and Chairman of Monaker Group, Inc. Mr. Kerby has been CEO since the inception of the Company.
|
(2)
|
Omar Jimenez was hired as CFO and COO of Monaker Group, Inc. on January 21, 2016.
|
(3)
|
William Kerby receives an annual base salary of $300,000.
|
(4)
|
Omar Jimenez receives a base salary of $250,000.
|
(5)
|
William Kerby receives additional compensation in the form of a Car Allowance in the amount of $1,200 per month.
|
(6)
|
William Kerby receives additional compensation in the form of a Merchant Banking Guarantee in the amount of $2,100 per month.
|
(7)
|
On April 19, 2017, we issued Omar Jimenez, the
Company’s Chief Financial Officer, Chief Operating Officer and director, 100,000 shares of restricted common stock
valued at $250,000 or $2.50 per share as bonus compensation for the fiscal year ended February 28, 2017.
|
Outstanding Equity Awards at Fiscal Year-End
None.
Employment Agreements
We have the following employment contracts in place
with our Named Executive Officers:
William Kerby
William Kerby entered into an employment agreement,
dated October 15, 2006, with the Company. Pursuant to this employment agreement, Mr. Kerby is employed as the Company’s Chief
Executive Officer at an annual base salary of $300,000 in cash. He may also, as determined by the Board of Directors,
receive a year-end performance bonus. The initial term of the agreement commenced October 15, 2006, with automatic renewal periods
of four years each, which automatically renewed on October 15, 2010 and October 15, 2014, and is currently in place until October
14, 2018.
In the event the agreement is terminated by the
Company with notice of non-renewal, the Company is required to pay Mr. Kerby all salary earned up until the date of termination,
plus three months’ severance. The Agreement is also terminated upon the death or disability (i.e., he is unable to perform
duties for a period of 120 days out of any 180 day period) of Mr. Kerby, and can be terminated by the Company for cause (gross
negligence, willful misconduct, willful nonfeasance, material breach, conviction following final disposition of any available appeal
of a felony or pleading guilty to or no contest to any felony) or without cause, and by Mr. Kerby for good reason (i.e., in the
event the Company breaches any term of the agreement) or for no reason. In the event Mr. Kerby’s employment is terminated
due to Mr. Kerby’s death, the Company is required to continue to pay his salary to his estate for a period of six months.
In the event Mr. Kerby’s employment is terminated due to Mr. Kerby’s disability, the Company is required to continue
to pay Mr. Kerby’s salary for the greater of two years or the period until disability insurance benefits furnished by the
Company, if any, begin. In the event Mr. Kerby terminates his employment for good reason or the Company terminates his employment
without cause, the Company is required to continue to pay Mr. Kerby’s salary and benefits for the remainder of the then term.
In the event the Company terminates his employment for cause, Mr. Kerby is due his salary through the termination date. The agreement
includes non-solicitation and non-competition clauses, prohibiting him from soliciting customers and clients of the Company or
otherwise interfering with the Company’s employees for a period of six months from the date of termination, and prohibiting
him from competing against the Company anywhere in the United States, for a period of three months from the date of termination,
respectively, provided that the non-competition provision is voided in the event of the non-renewal of the agreement, in the event
Mr. Kerby terminates his employment for good reason, in the event the Company terminates the agreement other than for cause, and
certain other reasons described in greater detail in the agreement.
Omar Jimenez
Omar Jimenez has an employment agreement, dated
January 21, 2016, with the Company. Mr. Jimenez is employed as the Chief Financial Officer and Chief Operating Officer of the Company.
The employment agreement provides that Mr. Jimenez receives a base salary for such services at an annual rate of $175,000 per year,
which was increased in July 2016 to $250,000 per year, and is eligible for cash or common stock bonuses at the discretion of the
board of directors. If the agreement is terminated by Mr. Jimenez for good reason (as defined in the agreement) or by the Company
without cause, and other than due to Mr. Jimenez’s death or disability, Mr. Jimenez is due two calendar months of severance
pay; if the agreement is terminated due to Mr. Jimenez’s disability, Mr. Jimenez, is due compensation through the remainder
of the month during which he was terminated. The agreement includes a one year non-solicitation and non-competition clause following
the date of the termination of the agreement, which non-competition clause prohibits him (without the prior written consent of
the Company which consent will not be unreasonably withheld) from directly or through another person or another entity carrying
on or being engaged in any business within North America which is competitive with the business of the Company, however that the
non-compete shall terminate in the event of a termination of employment by Mr. Jimenez for good reason or a termination by the
Company other than for cause or disability.
STOCK OPTION PLAN
None.
DIRECTOR COMPENSATION TABLE
The following table sets forth information concerning
the total compensation that we have paid or that has accrued on behalf of our non-executive directors during the fiscal year ended
February 28, 2017. Our executive directors do not receive compensation for their service on the Board of Directors separate from
the compensation they receive as an executive officer of the Company, as described above.
Name
|
|
Fiscal
Year
|
|
|
Fees
Earned
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non
Equity
Incentive
Plan
Comp
|
|
|
Non
Qualified
Deferred
Comp
|
|
|
All other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pat LaVecchia,
|
|
2017
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald P. Monaco,
|
|
2017
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doug Checkeris,
|
|
2017
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simon Orange,
|
|
2017
|
|
|
$
|
50,000
|
|
|
$
|
40,000
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
10,000
|
|
|
$
|
100,000
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Post,
|
|
2017
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A formalized Director Compensation plan has
not been approved as of the date of this filing.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information
regarding the beneficial ownership of our common stock and preferred stock as of the date of this Annual Report by (i) each Named
Executive Officer, (ii) each member of our Board of Directors, (iii) each person deemed to be the beneficial owner of more than
five percent (5%) of any class of our capital stock, and (iv) all of our executive officers and directors as a group. Unless otherwise
indicated, each person named in the following table is assumed to have sole voting power and investment power with respect to all
shares of our common stock listed as owned by such person. The address of each person is deemed to be the address of the Company
unless otherwise noted.
Beneficial ownership is determined in accordance
with the rules of the SEC and includes voting and/or investing power with respect to securities. These rules generally provide
that shares of common stock subject to options, warrants or other convertible securities that are currently exercisable or convertible,
or exercisable or convertible within 60 days of May 3, 2017, are deemed to be outstanding and to be beneficially owned by the person
or group holding such options, warrants or other convertible securities for the purpose of computing the percentage ownership of
such person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person
or group.
To our knowledge, except as indicated in the footnotes
to this table and pursuant to applicable community property laws, (a) the persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by them, subject to applicable community property
laws; and (b) no person owns more than 5% of our common stock. Unless otherwise indicated, the address for each of the officers
or directors listed in the table below is 2690 Weston Road, Suite 200, Weston, FL 33331.
Name
|
Number of Common Stock Shares (a)
|
|
Percent of Common Stock (1)
|
|
Number of Series A Preferred Stock Shares (b)
|
|
Percent of Series A Preferred Stock (1)
|
|
Total Voting Shares
|
Percent of Total Voting Shares (2)
|
Name
|
|
Number of Common Stock Shares (a)
|
|
|
|
Percent of Common Stock (1)
|
|
|
Number of Series A Preferred Stock Shares (b)
|
|
|
Percent of Series A Preferred Stock (1)
|
|
|
Total Voting Shares
|
|
|
Percent of Total Voting Shares
(2)
|
|
Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Kerby
|
|
|
1,690,069
|
|
(3)
|
|
|
13.1
|
%
|
|
|
794,611
|
|
|
|
42.5
|
%
|
|
|
79,561,947
|
|
|
|
40.1
|
%
|
Omar Jimenez
|
|
|
100,000
|
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
*
|
|
Donald P. Monaco
|
|
|
3,962,046
|
|
(4)
|
|
|
29.1
|
%
|
|
|
1,075,000
|
|
|
|
57.5
|
%
|
|
|
109,312,066
|
|
|
|
55.1
|
%
|
Pat LaVecchia
|
|
|
126,100
|
|
|
|
|
1.1
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
126,100
|
|
|
|
*
|
|
Doug Checkeris
|
|
|
100,000
|
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
*
|
|
Simon Orange
|
|
|
474,000
|
|
|
|
|
4.1
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
474,000
|
|
|
|
*
|
|
Robert J. Post
|
|
|
100,000
|
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Named Executive Officers and Directors as a Group (7 persons)
|
|
|
6,552,235
|
|
|
|
|
42.6
|
%
|
|
|
1,869,611
|
|
|
|
100.0
|
%
|
|
|
189,774,113
|
|
|
|
95.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Wilton
|
|
|
1,790,683
|
|
(5)
|
|
|
15.4
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
1,790,683
|
|
|
|
*
|
|
Stephen Romsdahl
|
|
|
692,668
|
|
(6)
|
|
|
6.1
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
692,668
|
|
|
|
*
|
|
* Less than 1%
(a) Includes (i) options, warrants and convertible
securities exercisable or convertible for common stock, and (ii) shares of common stock issuable upon conversion of preferred stock,
which shares are also provided separately in the table above where applicable, each within 60 days of May 3, 2017.
(b) Each share of Series A Preferred Stock votes
on a 100-for-1 basis with the common stock on all stockholder matters and is convertible at the option of the holder thereof on
a 2-for-1 basis into common stock
(1) Based on 11,344,182 shares of common
stock outstanding and 1,869,611 shares of Series A Preferred Stock outstanding.
(2) Based on 198,305,282 total voting shares,
which includes 11,344,182 shares voted by the common stock and 186,961,100 shares voted by the Series A Preferred Stock.
(3) William Kerby holds 100,100 shares of common
stock individually. Mr. Kerby owns 694,611 shares of Series A Preferred Stock individually and 100,000 shares of Series A Preferred
Stock as the owner of In-Room Retail Systems, LLC, which owns 100,000 shares of Series A Preferred Stock.
(4) Donald P. Monaco beneficially owns 1,075,000
shares of Series A Preferred Stock, of which (i) 500,000 shares are beneficially owned by the Donald P. Monaco Insurance Trust
(the “Trust”), and (ii) 575,000 shares are beneficially owned by Monaco Investment Partners II, LP (“MI Partners”).
Mr. Monaco also beneficially owns 1,712,046 shares of common stock of the Company of which (i) 906,292 shares are beneficially
owned by the Trust, and (ii) 805,754 shares are beneficially owned by MI Partners. Mr. Monaco also beneficially owns warrants to
purchase 100,000 shares of common stock of the Company owned by MI Partners. Mr. Monaco is the managing general partner of MI Partners
and trustee of the Trust. Mr. Monaco disclaims beneficial ownership of all shares held by the Trust and MI Partners in excess of
his pecuniary interest, if any.
(5) Address: 1314 E. Las Olas Blvd Apt #45, Fort
Lauderdale, FL 33301.
(6) Address: 40739 690th Ave, Saint James, MN 56081.
Changes in Control
We are not aware of any arrangements that may result
in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
Item 13. Certain Relationships and Related
Transactions, and Director Independence.
Except as discussed below or otherwise disclosed
above under “Item 11. Executive Compensation” or “Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities” – “Recent Issuances of Unregistered Securities”,
which information is incorporated by reference where applicable in this “Item 13. Certain Relationships and Related Transactions,
and Director Independence”, the following sets forth a summary of all transactions since the beginning of the fiscal year
of 2016, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or
exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at the fiscal year-end for 2017
and 2016, and in which any related person had or will have a direct or indirect material interest (other than compensation described
under “Item 11. Executive Compensation”). We believe the terms obtained or consideration that we paid or received,
as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would
be paid or received, as applicable, in arm’s-length transactions.
On October 1, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, subscribed for $250,000 of units
(100,000 total units) in our offering of up to $750,000 of units of the Company, each comprised of 1 share of common stock and
1 cashless warrant to purchase one share of common stock at an exercise price of $1.50 per share.
On November 11, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, subscribed for $250,000 of units
(100,000 total units) in our offering of up to $750,000 of units of the Company, each comprised of 1 share of common stock and
1 cashless warrant to purchase one share of common stock at an exercise price of $1.50 per share.
On November 13, 2015, Mark Wilton, a greater than
5% shareholder of the Company, converted 30,000 shares, at $5.00 per share, of Series B Preferred Stock and was issued 60,000 shares
of restricted common stock.
On November 13, 2015, Adam Friedman, our former
CFO of the Company, converted 26,200 shares, at $5.00 per share, of Series C Preferred Stock and was issued 52,400 shares of restricted
common stock.
On November 13, 2015, Doug Checkeris, Director
of the Company, converted 50,000 shares, at $5.00 per share, of Series C Preferred Stock and was issued 100,000 shares of restricted
common stock.
On November 13, 2015, Adam Friedman, former CFO
of the Company, converted 15,000 shares, at $5.00 per share, of Series D Preferred Stock and was issued 30,000 shares of restricted
common stock.
On November 13, 2015, Pat LaVecchia, Director of
the Company, converted 61,800 shares, at $5.00 per share, of Series C Preferred Stock and was issued 123,600 shares of restricted
common stock.
On November 17, 2015, 30,000 shares of common stock
were issued to William Kerby, CEO and Chairman of the Company, upon conversion of 15,000 shares of Series A Preferred Stock at
$5.00 per share.
On November 25, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, subscribed for $250,000 of units
(100,000 total units) in our offering of up to $750,000 of units of the Company, each comprised of 1 share of common stock and
1 cashless warrant to purchase one share of common stock at an exercise price of $1.50 per share.
On November 25, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, converted outstanding convertible
promissory notes of $75,000 and Donald P Monaco Insurance Trust, of which Donald Monaco is the trustee and a Director of the Company,
converted outstanding convertible promissory notes of $325,000 for a combined, total of $400,000 in principal and $165,731 of accrued
interest, into 226,292 shares of the Company’s common stock.
On November 25, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company converted outstanding convertible
promissory notes totaling $575,000 in principal and $189,384 of accrued interest into 305,754 shares of the Company’s common
stock.
On December 17, 2015, William Kerby, CEO and Chairman
of the Company, converted 35,000 shares, at $5.00 per share, of Series C Preferred Stock and was issued 70,000 shares of restricted
common stock.
On January 22, 2016, Donald P Monaco Insurance
Trust, of which Donald Monaco is the trustee and a Director of the Company, subscribed for $600,000 of units (240,000 total units)
in our offering of up to $600,000 of units of the Company, each comprised of 1 share of common stock and 1 cashless warrant to
purchase one share of common stock at an exercise price of $1.50 per share.
On March 15, 2016, Stephen Romsdahl, a greater
than 5% shareholder of the Company, subscribed for $120,000 of units (48,000 total units) in our offering of up to $400,000 of
units of the Company, each comprised of 1 share of common stock and 2 Special Exchange warrants to purchase one share of common
stock at an exercise price of $0.25 per share.
On March 17, 2016, Mark Wilton, a greater than
5% shareholder of the Company, subscribed for $60,000 of units (24,000 total units) in our offering of up to $400,000 units of
the Company, each comprised of 1 share of common stock and 2 Special Exchange warrants to purchase one share of common stock at
an exercise price of $0.25 per share.
On May 3, 2016, Monaco Investment Partners II,
L.P, of which Donald Monaco is the managing general partner and a Director of the Company, exercised warrants to purchase 200,000
shares of common stock at an exercise price of $1.50 per share.
On June 1, 2016, the Company received $90,000 in
proceeds from Donald P Monaco Insurance Trust (whose trustee is Donald Monaco a director of Monaker) and issued 60,000 common shares
in connection with a partial warrant exercise for $1.50 per share.
On June 2, 2016, the Company borrowed three
hundred thousand dollars ($300,000) from the Donald P. Monaco Insurance Trust (“Trust”), which was evidenced by a Promissory
Note (“Note”) in the principal amount of three hundred thousand dollars ($300,000), which accrues interest at the rate
of 6% per annum (12% upon the occurrence of an event of default). All principal, interest and other sums due under the Note is
due and payable on the earlier of (a) the date the operations of NextTrip.com generate net revenues equal to $300,000; (b) the
date the Company enters into an alternate financing in excess of $300,000; or (c) August 1, 2016. The Note contains standard and
customary events of default. Donald P. Monaco, a member of our Board of Directors, is the trustee of the Trust. This Note may be
prepaid in whole or in part at any time, without penalty or premium. On June 24, 2016, we repaid this Note.
Messrs. Donald P. Monaco, Pat LaVecchia, Douglas
Checkeris and William Kerby who represented all of the members of the Board of Directors of Monaker resigned as directors of RealBiz
effective Monday April 11, 2016.
Through October 2015, the Company received and/or
made advances to/from its unconsolidated affiliated company, RealBiz Media Group, Inc. resulting in a net receivable due from RealBiz
in excess of $5.8 million. At February 29, 2016, Monaker owned 44,470,101 shares of RealBiz Series A Preferred Stock and 10,359,890
shares of RealBiz common stock, representing 28% ownership of RealBiz. The equity interest, along with a net receivable balance
due from the above-mentioned transactions, has been written down to zero ($0) to reflect the realizable value of this investment
and asset.
On November 20, 2015, the Company entered
into two exchange agreements (the “
Exchange
”) in which it exchanged an aggregate of $1,330,115 of the Company’s
convertible promissory notes and accrued interest (the “
Notes
”) for an aggregate of 532,046 shares of the Company’s
common stock (calculated at $2.50 per share of common stock for the Notes). The exchanged Notes consisted of the following: (i)
$764,384 of Notes were exchanged by Monaco Investment Partners II, LP (“
Monaco Investments
”) for 305,754 shares
of common stock; and (ii) $565,731 of Notes were exchanged by the Trust for 226,292 shares of common stock. Donald P. Monaco, a
member of our Board of Directors, is the managing general partner of Monaco Investments and the trustee of the Trust.
During the year ended February 29, 2016, the Company
granted warrants to purchase 30,000 shares of common stock for the settlement of the Company’s note payable with Mark Wilton
(greater than 5% shareholder), of which warrants to purchase 89,300 shares of common stock were exercised; warrants to purchase
120,000 shares of common stock were cancelled; and warrants to purchase 176,743 shares of common stock expired.
On June 15, 2016, we entered into a revolving line
of credit agreement with Republic Bank, Inc. of Duluth, Minnesota, in the maximum amount of $1,000,000. Amounts borrowed under
the line of credit accrue interest at the Wall Street Journal U.S. Prime Rate plus 1% (updated daily until maturity), payable monthly
in arrears beginning on July 15, 2016. Any amounts borrowed under the line of credit are due on June 15, 2017. Amounts borrowed
under the line of credit are planned to be used for marketing initiatives, working capital and to repay $300,000 previously borrowed
from the Donald P. Monaco Insurance Trust, of which Donald Monaco, a Director of the Company, is the Trustee. The loan contains
standard and customary events of default. On June 16, 2016, we borrowed $450,000 under the line of credit.
On July 8, 2016, Stephen Romsdahl, a greater than
5% shareholder of the Company, exercised warrants to purchase 96,000 shares of common stock which had an exercise price of $0.25
per share for an aggregate of $24,000.
On August 23, 2016, Pat LaVecchia, our director,
converted 1,000 shares of Series D Preferred Stock into shares of common stock in connection with a special exchange conversion
whereby Series D Preferred Stock shareholders were offered a special conversion rate of $2.50 per share of the Company’s
common stock, provided accrued dividends were waived (instead of the stated $12.50 conversion price), into 2,000 shares of common
stock at $2.50 per share, valued at $5,000.
Effective September 8, 2016,
the Company sold 138,000 units, each consisting of one share of common stock and one warrant to purchase one share of common stock
(the “Units”), to Charcoal Investments Ltd. (“Charcoal”), which entity is owned by Simon Orange, who became
a member of the Board of Directors of the Company on January 5, 2017, in consideration for $345,000 or $2.50 per unit. The warrants
were evidenced by a Warrant to Purchase Common Stock (the “Charcoal Warrants”), had an exercise price of $2.50 per
share and an expiration date of September 7, 2017.
Also on September 8, 2016, the
Company entered into a consulting agreement with Mr. Orange, pursuant to which Mr. Orange agreed to provide the Company consulting
services by aiding the Company in financial, organizational and developmental advice during a twelve month period. In connection
with assisting with a $750,000 private offering of units (pursuant to which Charcoal subscribed for units as described above),
Mr. Orange received compensation consisting of cash, shares and warrants.
On October 26, 2016, Donald P.
Monaco Insurance Trust, of which Donald Monaco is the trustee and a Director of the Company, exercised warrants to purchase 280,000
shares of common stock with an exercise price of $1.50 per share.
On November 4, 2016, Mark Wilton,
a greater than 5% shareholder of the Company, was issued 114,770 shares of restricted common stock pursuant to a subscription agreement
for $99,800 in proceeds.
On December 1, 2016, Stephen
Romsdahl, a greater than 5% shareholder of the Company, exercised warrants to purchase 85,000 shares of common stock which had
an exercise price of $0.50 per share.
On December 20, 2016, we borrowed
$37,500 from In Room Retail, which was evidenced by a Promissory Note (“Note”) in the principal amount of $37,500,
which accrued interest at the rate of 6% per annum. William Kerby, our Chairman and Chief Executive Officer, is the managing member
of In Room Retail.
On January 26, 2017, the
Company, Mr. Orange, a director, and Charcoal, agreed to reduce the exercise price of the 158,000 warrants to purchase shares
of common stock (the “Warrants”) to $2.00 per share and Mr. Orange and Charcoal exercised all of the Warrants in
consideration for an aggregate of $316,000, and the Company issued Mr. Orange 20,000 shares of restricted common stock and
Charcoal 138,000 shares of restricted common stock, in connection with such exercise. In consideration for agreeing to
exercise the Warrants, the Company granted Mr. Orange warrants to purchase 20,000 shares of the Company’s common stock
and Charcoal warrants to purchase 138,000 shares of common stock, each with an exercise price of $2.00 per share and an
expiration date of January 25, 2020.
From February 6, 2017 to March 10, 2017, the Company
raised $1,550,000 from the sale of 775,000 units, each consisting of one share of restricted common stock and one warrant to purchase
one share of common stock (the “Units”), to fourteen accredited investors in a private offering, at $2 per Unit. Investors
in the offering included an entity owned by Donald P. Monaco, the Company’s director (100,000 Units for $200,000), and Robert
J. Post, the Company’s director (50,000 Units for $100,000). The warrants have an exercise price of $2.00 per share and a
term of three years, and include no cashless exercise rights.
Dividends in arrears on the outstanding Series A Preferred Stock shares
(which are beneficially owned by Donald P. Monaco, our director and William Kerby, our CEO and Chairman) total $1,025,233 and $838,272
as of February 28, 2017 and February 29, 2016, respectively.
On April 19, 2017, we issued 100,000 shares of common stock to Omar
Jimenez, a member of the Board of Directors and an executive of the Company, valued at $250,000, as a fiscal year-ended February
28, 2017 employee bonus.
Director Independence
The Board of Directors annually determines the
independence of each director and nominee for election as a director. The Board makes these determinations in accordance with the
listing standards of the various exchanges for the independence of directors and the SEC’s rules.
In assessing director independence, the Board considers,
among other matters, the nature and extent of any business relationships, including transactions conducted, between the Company
and each director and between the Company and any organization for which one of our directors is a director or executive officer
or with which one of our directors is otherwise affiliated.
The Board has affirmatively determined that each
of Mr. Pat LaVecchia, Mr. Doug Checkeris, Mr. Robert Post and Mr. Simon Orange are independent.
Review, Approval and Ratification of Related
Party Transactions
Given our small size and limited financial resources,
we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described
above, with our executive officers, directors and significant stockholders. However, all of the transactions described above were
approved and ratified by the Board of Directors and one or more officers of the Company. In connection with the approval of the
transactions described above, the Board of Directors took into account several factors, including its fiduciary duty to the Company;
the relationships of the related parties described above to the Company; the material facts underlying each transaction; the anticipated
benefits to the Company and related costs associated with such benefits; whether comparable products or services were available;
and the terms the Company could receive from an unrelated third party.
Item 14. Principal Accountant Fees and
Services.
(1) Audit Fees
The aggregate fees billed for each of the last
two fiscal years for professional services rendered by our principal accountant for our audit of annual consolidated financial
statements and review of consolidated financial statements included in our quarterly reports or services that are normally
provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were:
February 28, 2017
|
|
$
|
30,000
|
|
February 28, 2016
|
|
$
|
42,500
|
|
(2) Audit-Related Fees
The aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the
audit or review of our consolidated financial statements and are not reported in the preceding paragraph:
February 28, 2017
|
|
$
|
39,000
|
|
February 28, 2016
|
|
$
|
35,000
|
|
(3) Tax Fees
The aggregate fees billed in each of the last two
fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were:
February 28, 2017
|
|
$
|
0
|
|
February 28, 2016
|
|
$
|
2,500
|
|
(4) All Other Fees
The aggregate fees billed in each of the last two
fiscal years for the products and services provided by the principal accountant other than the services reported in paragraphs
(1), (2), and (3) was:
February 28, 2017
|
|
$
|
0
|
|
February 28, 2016
|
|
$
|
0
|
|
PART
IV
Item
15. Exhibits, Financial Statement Schedules.
Financial
Statements
Description
|
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
|
F-
2
|
Consolidated
Balance Sheets
|
|
F-
3
|
Consolidated
Statements of Operations
|
|
F-
4
|
Consolidated
Statement of Cash Flows
|
|
F-
5
|
Consolidated
Statements of Stockholders’ Deficit
|
|
F-
6
|
Notes
to Consolidated Financial Statements
|
|
F-
7
|
The
information required by this Section (a) (3) of Item 15 is set forth on the exhibit index that follows the Signatures page of
this Form 10-K.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and Board of Directors
Monaker
Group, Inc.
We
have audited the accompanying consolidated balance sheets of Monaker Group, Inc. (formerly known as Next I Interactive, Inc.)
and its subsidiaries (the “Company”) as of February 28, 2017 and February 29, 2016 and the related consolidated statements
of operations, statement of stockholders’ deficit, and cash flows for the years ended February
28, 2017 and February 29, 2016. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Monaker Group, Inc. (formerly known as Next 1 Interactive, Inc.) and subsidiaries at February 28, 2017 and February 29, 2016
and the results of their operations and their cash flows for the years ended February 28, 2017 and February 29, 2016, in conformity
with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the
consolidated financial statements, the Company’s accumulated deficit and limited financial resources raise
substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
|
/s/
LBB & Associates Ltd. LLP
|
|
|
Houston,
TX
May
4, 2017
Monaker
Group, Inc. and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
February
28,
2017
|
|
|
February
29,
2016
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,007,065
|
|
|
$
|
137,944
|
|
Notes receivable
|
|
|
750,000
|
|
|
|
15,000
|
|
Prepaid expenses and
other current assets
|
|
|
42,894
|
|
|
|
50,848
|
|
Security
deposits
|
|
|
15,000
|
|
|
|
13,206
|
|
Total current assets
|
|
|
1,814,959
|
|
|
|
216,998
|
|
|
|
|
|
|
|
|
|
|
Website development
costs and intangible assets, net
|
|
|
772,069
|
|
|
|
2,625,086
|
|
Investment
in unconsolidated affiliate
|
|
|
—
|
|
|
|
56,000
|
|
Total
assets
|
|
$
|
2,587,028
|
|
|
$
|
2,898,084
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Convertible
promissory notes, related parties
|
|
$
|
1,409,326
|
|
|
$
|
1,409,326
|
|
Convertible promissory notes
|
|
|
—
|
|
|
|
249,582
|
|
Line
of credit
|
|
|
1,193,000
|
|
|
|
—
|
|
Notes payable - related party
|
|
|
—
|
|
|
|
15,919
|
|
Accounts payable and
accrued expenses
|
|
|
262,493
|
|
|
|
588,513
|
|
Other current liabilities
|
|
|
153,648
|
|
|
|
60,570
|
|
Notes
payable - current portion
|
|
|
—
|
|
|
|
711,784
|
|
Total current liabilities
|
|
|
3,018,467
|
|
|
|
3,035,694
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,018,467
|
|
|
|
3,035,694
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
Series A Convertible
Preferred stock, $.01 par value; 3,000,000 authorized; and 1,869,611 and 1,869,611 shares issued and outstanding at February
28, 2017 and February 29, 2016, respectively
|
|
|
18,696
|
|
|
|
18,696
|
|
Series B Convertible
Preferred stock, $.00001 par value; 3,000,000 authorized; 0 and 125,200 shares issued and outstanding at February 28, 2017
and February 29, 2016, respectively
|
|
|
—
|
|
|
|
1
|
|
Series C Convertible
Preferred stock, $.00001 par value; 3,000,000 authorized; 0 and 13,100 shares issued and outstanding at February 28, 2017
and February 29, 2016, respectively
|
|
|
—
|
|
|
|
—
|
|
Series D Convertible
Preferred stock, $.00001 par value; 3,000,000 authorized; 0 and 132,156 shares issued and outstanding at February 28, 2017
and February 29, 2016, respectively
|
|
|
—
|
|
|
|
2
|
|
Common stock, $.00001
par value; 500,000,000 shares authorized; 11,133,938 and 6,686,540 shares issued and outstanding at February 28, 2017 and February
29, 2016, respectively
|
|
|
111
|
|
|
|
67
|
|
Additional paid-in-capital
|
|
|
100,209,386
|
|
|
|
92,925,589
|
|
Accumulated
deficit
|
|
|
(100,659,632
|
)
|
|
|
(93,562,357
|
)
|
Total
Monaker Group, Inc. stockholders’ deficit
|
|
|
(431,439
|
)
|
|
|
(618,002
|
)
|
Non-controlling
interest
|
|
|
—
|
|
|
|
480,392
|
|
Total
stockholders’ deficit
|
|
|
(431,439
|
)
|
|
|
(137,610
|
)
|
Total
liabilities and stockholders’ deficit
|
|
$
|
2,587,028
|
|
|
$
|
2,898,084
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Monaker
Group, Inc. and Subsidiaries
Consolidated
Statements of Operations
For
the years ended
|
|
|
|
|
|
|
|
|
February 28,
2017
|
|
|
February 29,
2016
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Travel and commission revenues
|
|
$
|
400,277
|
|
|
$
|
544,658
|
|
Total revenues
|
|
|
400,277
|
|
|
|
544,658
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
5,012,505
|
|
|
|
1,972,016
|
|
Salaries and benefits
|
|
|
1,539,112
|
|
|
|
1,807,212
|
|
Cost of revenues
|
|
|
359,239
|
|
|
|
217,302
|
|
Technology and development
|
|
|
244,484
|
|
|
|
54,846
|
|
Selling and promotions expense
|
|
|
176,715
|
|
|
|
21,924
|
|
Total operating expenses
|
|
|
7,332,055
|
|
|
|
4,073,300
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(6,931,778
|
)
|
|
|
(3,528,642
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
|
97,942
|
|
|
|
—
|
|
Gain on sales of investments
|
|
|
66,011
|
|
|
|
—
|
|
Interest expense
|
|
|
(248,200
|
)
|
|
|
(384,899
|
)
|
Loss from legal settlement
|
|
|
(81,832
|
)
|
|
|
(125,000
|
)
|
Gain on sale of subsidiary
|
|
|
—
|
|
|
|
1,082,930
|
|
Gain on change in fair value of derivatives
|
|
|
—
|
|
|
|
287,149
|
|
Loss on inducement to convert preferred stock
|
|
|
—
|
|
|
|
(1,392,666
|
)
|
Loss on settlement of debt
|
|
|
—
|
|
|
|
(478,956
|
)
|
Other income (expense)
|
|
|
582
|
|
|
|
(10,400
|
)
|
Total other income (expense)
|
|
|
(165,497
|
)
|
|
|
(1,021,842
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,097,275
|
)
|
|
$
|
(4,550,484
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,611,455
|
|
|
|
2,913,266
|
|
Diluted
|
|
|
8,611,455
|
|
|
|
2,913,266
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share
|
|
$
|
(0.82
|
)
|
|
$
|
(1.56
|
)
|
|
|
|
|
|
|
|
|
|
Diluted net loss per share
|
|
$
|
(0.82
|
)
|
|
$
|
(1.56
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
Monaker
Group, Inc. and Subsidiaries
Consolidated Statements of
Cash Flows
For the years ended
|
|
|
|
|
|
|
|
|
February 28,
2017
|
|
|
February 29,
2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,097,275
|
)
|
|
$
|
(4,550,484
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
1,779,820
|
|
|
|
164,615
|
|
Stock based compensation and consulting fees
|
|
|
2,165,579
|
|
|
|
1,019,384
|
|
Gain on sales of investments
|
|
|
(66,011
|
)
|
|
|
—
|
|
(Gain) loss on settlement of debt
|
|
|
(97,942
|
)
|
|
|
478,956
|
|
Loss on inducement to convert preferred stock
|
|
|
—
|
|
|
|
1,392,666
|
|
Gain on sale of subsidiary
|
|
|
—
|
|
|
|
(1,082,930
|
)
|
Gain on change in fair value of derivatives
|
|
|
—
|
|
|
|
(287,149
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease in prepaid expenses and other current assets
|
|
|
7,954
|
|
|
|
17,311
|
|
Decrease in accounts payable and accrued expenses
|
|
|
(316,609
|
)
|
|
|
(8,131
|
)
|
Decrease in other current liabilities
|
|
|
(111,625
|
)
|
|
|
(147,180
|
)
|
Increase in security deposits
|
|
|
(1,794
|
)
|
|
|
—
|
|
Dividends receivable RBIZ Preferred Series A
|
|
|
—
|
|
|
|
881,587
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(3,737,903
|
)
|
|
|
(2,121,355
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Payments related to website development costs
|
|
|
(685,414
|
)
|
|
|
(112,466
|
)
|
Investment in Name Your Fee, LLC
|
|
|
—
|
|
|
|
80,392
|
|
Net cash used in investing activities
|
|
|
(685,414
|
)
|
|
|
(32,074
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants
|
|
|
3,002,797
|
|
|
|
2,144,722
|
|
Proceeds from exercise of common stock warrants
|
|
|
1,327,142
|
|
|
|
—
|
|
Proceeds from line of credit, net
|
|
|
1,193,000
|
|
|
|
—
|
|
Proceeds from shareholder loans
|
|
|
153,500
|
|
|
|
15,919
|
|
Payments on convertible promissory notes
|
|
|
(214,582
|
)
|
|
|
(128,000
|
)
|
Payment on shareholder loans
|
|
|
(169,419
|
)
|
|
|
—
|
|
Proceeds from issuance of series C preferred shares
|
|
|
—
|
|
|
|
27,500
|
|
Proceeds from collection of stock subscription receivable
|
|
|
—
|
|
|
|
5,000
|
|
Proceeds from sales of subsidiaries
|
|
|
—
|
|
|
|
20
|
|
Stock split
|
|
|
—
|
|
|
|
(200
|
)
|
Net cash provided by financing activities
|
|
|
5,292,438
|
|
|
|
2,064,961
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
869,121
|
|
|
|
(88,468
|
)
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
137,944
|
|
|
|
226,412
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
|
1,007,065
|
|
|
|
137,944
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
252,396
|
|
|
|
215,823
|
|
Cash paid for taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activity:
|
|
|
|
|
|
|
|
|
Note payable and accrued interest converted to common stock
|
|
$
|
575,373
|
|
|
$
|
—
|
|
Common stock issued for investment
|
|
$
|
123,947
|
|
|
$
|
56,000
|
|
Shares/Warrants issued for conversion of debt to equity
|
|
$
|
75,000
|
|
|
$
|
5,768,494
|
|
Settlement of accrued interest with stock
|
|
$
|
14,000
|
|
|
$
|
—
|
|
Common stock for assets
|
|
$
|
—
|
|
|
$
|
1,188,001
|
|
Series D Preferred for assets
|
|
$
|
—
|
|
|
$
|
400,000
|
|
Preferred stock converted into common stock
|
|
$
|
—
|
|
|
$
|
150
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Monaker
Group, Inc. and Subsidiaries
Consolidated
Statement of Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A
Preferred Stock
|
|
|
Series
B
Preferred Stock
|
|
|
Series
C
Preferred Stock
|
|
|
Series
D
Preferred Stock
|
|
Stock
|
|
Stock
Sub
|
|
Common
Stock
|
|
Additional
Paid-in
|
|
Accumulated
|
|
Non-
Controlling
|
|
Stockholders’
Equity
|
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
Subscribed
|
|
Rec
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Interest
|
|
(Deficit)
|
|
Balances,
February 28, 2015
|
|
2,216,014
|
|
$
|
22,160
|
|
|
262,200
|
|
$
|
3
|
|
|
217,600
|
|
$
|
2
|
|
|
838,800
|
|
$
|
8
|
|
$
|
—
|
|
$
|
(5,000
|
)
|
21,108,347
|
|
$
|
211
|
|
$
|
78,228,898
|
|
$
|
(89,011,873
|
)
|
$
|
—
|
|
$
|
(10,765,591
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common
stock issued for cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1,102,000
|
|
|
11
|
|
|
2,144,711
|
|
|
—
|
|
|
—
|
|
|
2,144,722
|
|
Preferred
Series C issued for cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
27,500
|
|
|
—
|
|
|
—
|
|
|
27,500
|
|
Proceeds
- Series D Subscribed
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Preferred
Series D issued for investment in Name Your Fee
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
|
1
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
499,999
|
|
|
—
|
|
|
480,392
|
|
|
980,392
|
|
Preferred
Series D issued for assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,000
|
|
|
1
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
399,999
|
|
|
—
|
|
|
—
|
|
|
400,000
|
|
Common
stock issued for acquisition
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
455,000
|
|
|
5
|
|
|
1,187,996
|
|
|
—
|
|
|
—
|
|
|
1,188,001
|
|
Stock
based compensation
|
|
—
|
|
|
—
|
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
189,000
|
|
|
2
|
|
|
1,019,382
|
|
|
—
|
|
|
—
|
|
|
1,019,384
|
|
Common
stock issued for assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
100,000
|
|
|
1
|
|
|
55,999
|
|
|
—
|
|
|
—
|
|
|
56,000
|
|
Shares
converted to common stock - inducement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
A
|
|
(15,000
|
)
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
30,000
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
B
|
|
—
|
|
|
—
|
|
|
(147,000
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
18,000
|
|
|
—
|
|
|
108,602
|
|
|
—
|
|
|
—
|
|
|
108,600
|
|
Series
C
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(203,000
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
406,000
|
|
|
4
|
|
|
281,214
|
|
|
—
|
|
|
—
|
|
|
281,216
|
|
Series
D
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(731,944
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
1,355,000
|
|
|
14
|
|
|
829,673
|
|
|
—
|
|
|
—
|
|
|
829,680
|
|
Shares
issued for conversion of debt to common stock including inducement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2,700,000
|
|
|
27
|
|
|
8,138,151
|
|
|
—
|
|
|
—
|
|
|
8,138,178
|
|
Preferred
shares converted to RealBiz Media Group, Inc.
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
A
|
|
(331,403
|
)
|
|
(3,314
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
3,314
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
B
|
|
—
|
|
|
—
|
|
|
(20,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
C
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
D
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(112,100
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Preferred
Series retirement/cancel
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
C
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
D
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58,600
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Shares
issued from current year subscriptions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
Effect
of stock split
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(20,776,807
|
)
|
|
(208
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(208
|
)
|
Net
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,550,484
|
)
|
|
—
|
|
|
(4,550,484
|
)
|
Balances,
February 29, 2016
|
|
1,869,611
|
|
$
|
18,696
|
|
|
125,200
|
|
$
|
1
|
|
|
13,100
|
|
$
|
—
|
|
|
132,156
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
6,686,540
|
|
$
|
67
|
|
$
|
92,925,589
|
|
$
|
(93,562,357
|
)
|
$
|
480,392
|
|
$
|
(137,610
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common
stock & warrants issued for cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2,826,365
|
|
|
28
|
|
|
4,329,911
|
|
|
—
|
|
|
—
|
|
|
4,329,939
|
|
Stock
issued for compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
800,844
|
|
|
8
|
|
|
2,165,570
|
|
|
—
|
|
|
—
|
|
|
2,165,578
|
|
Shares
issued for Debt Retirement Principal and Int.
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
347,720
|
|
|
3
|
|
|
664,370
|
|
|
—
|
|
|
—
|
|
|
664,373
|
|
Preferred
shares converted to Monaker Group Common Stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
B
|
|
—
|
|
|
—
|
|
|
(110,200
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
220,400
|
|
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
C
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,100
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
26,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
D
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(110,156
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
198,312
|
|
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Preferred
shares converted to RealBiz Media Group, Inc.
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
B
|
|
—
|
|
|
—
|
|
|
(15,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
C
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Series
D
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Retired
Common Shares due to Agmt Termination
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(51,822
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for assets - Acq’s Vac Homes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
79,579
|
|
|
1
|
|
|
123,948
|
|
|
—
|
|
|
—
|
|
|
123,949
|
|
Sale
of Name Your Fee, LLC
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(480,392
|
)
|
|
(480,392
|
)
|
Net
Loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,097,275
|
)
|
|
—
|
|
|
(7,097,275
|
)
|
Balances,
February 28, 2017
|
|
1,869,611
|
|
$
|
18,696
|
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
11,133,938
|
|
$
|
111
|
|
$
|
100,209,386
|
|
$
|
(100,659,632
|
)
|
$
|
—
|
|
$
|
(431,439
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
Note 1 – Description of Business
Nature of Operations and Business Organization
Monaker Group, Inc. and
its subsidiaries (“Monaker”, “we”, “our”, “us”, or “Company”) operate
an online marketplace for the alternative lodging rental industry. Alternative lodging rentals (ALRs) are whole unit vacation homes
or timeshare resort units that are fully furnished, privately owned residential properties, including homes, condominiums, villas
and cabins, that property owners and managers rent to the public on a nightly, weekly or monthly basis. As an added feature to
our ALR offerings, we also provide access to airline, car rental, hotel and activities products along with concierge tours and
activities, at the destinations, that are catered to the traveler through our Maupintour products.
We provide a vacation
rental platform with auxiliary services so travelers can purchase vacations through one site; our NextTrip.com, Maupintour.com
or EXVG.com (or through distributors the Company provides ALRs to) while providing inquiries and bookings to property owners and
managers. NextTrip serves three major constituents: (1) property owners and managers, (2) travelers, and (3) other distributors.
Property owners and managers provide detailed listings of their properties to the Company with the goal of reaching a broad audience
of travelers seeking ALRs. The property owners and managers provide us their properties, at a preferential net rate for each booking
and, in return, their properties are listed for free as an available ALR on NextTrip.com (as well as other distributors who the
Company has provided ALRs to). Travelers visit NextTrip.com (as well as other distributors who the Company has provided ALRs to)
and are able to search and compare our large and detailed inventory of listings to find ALRs meeting their needs.
Monaker is a technology driven travel and logistics
company with ALR products as its distinguishing niche. The ALRs are owned and leased by third parties and are available to rent
through Monaker’s websites as well as other distributors who Monaker has provided ALRs to. Monaker’s services include
critical elements such as technology, an extensive film library, media distribution, trusted brands and established partnerships
that enhance product offerings and reach. Monaker has video content, media distribution, key industry relationships and a prestigious
Travel Brand as cornerstones for the development and planned deployment of core-technology on both proprietary and partnership
platforms.
Summary
Monaker sells travel services to leisure and corporate
customers around the world. The primary focus is on providing ALR options as well as providing schedule,
pricing and availability information for booking reservations for airlines, hotels, rental cars, cruises and other travel products
such as sightseeing tours, show and event tickets and theme park passes. The Company sells these travel services both individually
and as components of dynamically-assembled packaged travel vacations and trips. In addition, the Company provides content that
presents travelers with information about travel destinations, maps and other travel details; this content information is the product
of proprietary video-centered technology that allows the Company to create targeted travel videos from its film libraries. In April
2017, the Company introduced its new Travel Platform under the NextTrip brand. This platform continues to be improved with a focus
on maximizing the consumer’s experience and assisting them in the decision and purchasing process.
The platform is a combination of proprietary and
licensed technology (described below) that connects and searches large travel suppliers of alternative lodging inventories to present
to consumers comprehensive and optimal alternatives at the most inexpensive rates to choose from.
The Company sells its travel services through various
distribution channels. The primary distribution channel will be providing real-time bookable ALRs other distributors (such as other
travel companies’ websites and networks of third-party travel agents) who will sell the ALRs to their customers. The second
distribution channel is through its own website at NextTrip.com and the NextTrip mobile application (“app”) as well
as EXVG.com. The third distribution channel is selling travel services to customers through a toll-free telephone number designed
to assist customers with complex or high-priced offerings of Maupintour.
Monaker’s core holdings include
NextTrip.com, Maupintour.com and EXVG.com. NextTrip.com is the primary website, where travel services and products are booked.
The travel services and products include ALRs, tours, activities/attractions, airline, hotel, and car rentals. Maupintour complements
the Nextrip.com offering by providing high-end tour packages and activities/attractions. EXVG.com is the website where ALRs, that
are not real-time bookable, will be promoted.
Additional holdings include a 27% interest
in RealBiz Media Group, Inc. (“RealBiz”) which was deconsolidated on October 31, 2014 and written off as of February
29, 2016 as an unrealizable investment.
On October 31, 2014, RealBiz Media Group,
Inc. (RealBiz) was deconsolidated from the Company as the interest in RealBiz had fallen from 61% to 43% and as of February 28,
2017 the interest in RealBiz was at approximately 27% which is represented by 44,470,101 RealBiz Preferred Series A Shares and
10,359,890 shares of RealBiz common stock. In addition, the Company is owed in excess of $11.2 million in funds as a net receivable
balance due from RealBiz for amounts paid for the benefits and services provided by Monaker on behalf of RealBiz. Both the shares
and the net receivable have been written down to zero ($0) as of February 28, 2017 and February 29, 2016 to reflect the realizable
value of this investment and asset. These entities’ accounts are no longer consolidated in the accompanying financial statements
because we no longer have a controlling financial interest. All inter-company balances and transactions have been eliminated.
On November 16, 2016, RealBiz notified
Monaker that the Board of Directors of RealBiz voted to cancel and retire all issued and outstanding shares of RealBiz Preferred
Stock and all but 1,341,533 shares of common stock of RealBiz held by Monaker. RealBiz’s announced cancellation and retirement
was without Monaker’s consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s preferred
and common stock. We filed a complaint on November 30, 2016 (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media
Group, Inc., f/k/a Webdigs, Inc. and American Stock Transfer & Trust Company, LLC Case No.: 1:16-cv-24978-DLG), seeking damages
and injunctive and declaratory relief, arising from RealBiz’s declared cancellation and retirement of the shares.
The Company is a Nevada corporation headquartered
in Weston, Florida.
Products and Services
Monaker’s main focus is marketing alternative
lodging rental (ALR) options directly to consumers and to other travel distributors. The Company’s concentration on ALRs
is driven by contracts with vacation home unit owners and managers as well as owners, developers and managers of timeshare resort
units that are made available to consumers and other travel portals (distributors) for nightly or extended stays. In addition,
we augment our product offering to travelers by arranging for activities and tours through our subsidiary website Maupintour. Therefore,
not only is a traveler identifying a destination and the lodging at the destination but we can provide options of activities to
engage in while at the destination. Lastly, we provide the means for making arrangements for the airline tickets and car rentals
if desired and, if the traveler does not subscribe to the ALR accommodations, hotel rooms can also be selected. Therefore, Monaker,
through NextTrip, offers travelers the complete travel package made easy or…
Travel Made Easy
TM
Products and Services
For Property Owners And Managers
Performance-based listing.
Performance-based listings allow property owners and managers to list a property with no initial upfront fees and receive the
negotiated preferential net rate on traveler bookings generated on our websites.
Listings that are real-time
online bookable properties are managed by the property owner or manager through an application program interface (API) which provides
real-time updates to each property and immediately notifies the property owner or manager of all information regarding bookings,
modifications to bookings and cancellations of bookings. Information such as content, descriptions and images are provided to us
through that API.
Listings that are request-accept
are properties that require communication and approval from the property owner or manager (hence request-accept), are not managed
through an API (as discussed above). We provide a set of tools for the property owner or manager which enables them to manage an
availability calendar, reservations, inquiries and the content of the listing. These tools allow the property owner or manager
to create the listing by uploading photographs, text descriptions or lists of amenities, a map showing the location of the property,
and property availability, all of which can be updated throughout the term of the listing. Each listing provides travelers the
ability to use email or other methods to contact property owners and managers.
The listings include tools
and services to help property owners and managers run their vacation rental businesses more efficiently such as to responding to
and manage inquiries, preparing and sending rental quotes and payment invoices, allowing travelers to book online, including
being able to enter into rental agreements with travelers online, and processing online payments. Property owners and managers
that elect to process online payments are subject to a transaction fee.
Redistribution of Listings.
We make selected, online bookable properties available to online travel agencies as well as channel partners. These properties
have a listing on one of our websites. We are compensated for these services by receiving a negotiated net rate for each booking.
Products and Services
for Travelers
Search Tools and Ability
to Compare
. Our online marketplace NextTrip.com provides travelers with tools to search for and filter several travel
products including air, car, accommodations (including ALRs) and activities based on various criteria, such as destination, travel
dates, type of property, number of bedrooms, amenities, price, or keywords.
Traveler Login.
Travelers are able to create accounts on the NextTrip.com website that enable them to share their travel experiences and share
advice through the social media component (Discover) of the website. Videos and pictures as well as travel articles and blogs can
be accessed through Discover. They can also benefit from other features such as the ability to save lists of favorite properties
and send them to family and friends.
Security.
We
use a combination of technology and human review to evaluate the content of listings and to screen for inaccuracies or fraud with
the goal of providing only accurate and trustworthy information to travelers.
Reviews and Ratings.
Travelers are invited to submit online reviews of the vacation rentals they have rented through our websites. These reviews are
intended to convey the accuracy of the listing information found on our websites.
Communication.
Travelers who have created an account on our website receive regular communications, including notices about places of interest,
special offers, new listings, and an email newsletter. The newsletter is available to any traveler who agrees to receive it and
offers introductions to new destinations and vacation rentals, as well as tips and useful information when staying in vacation
rentals.
Mobile Websites and
Applications.
We provide versions of our websites formatted for web browsers on smart-phones and tablets so that property
owners, managers and travelers can access our websites and tools from mobile devices.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated
financial statements include the accounts of Monaker Group, Inc. and all of its wholly and majority-owned subsidiaries and have
been prepared in accordance with accounting principles generally accepted in the United States. All significant intercompany transactions
and balances have been eliminated in consolidation.
Business Segment
The Company has one operating
segment consisting of various products and services related to its online marketplace of travel and accommodation rental listings.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could
have a material effect on the Company’s future results of operations and financial position. Significant items subject to
estimates and assumptions include certain revenues, the allowance for doubtful accounts, the fair value of short-term investments,
the carrying amounts of goodwill and other indefinite-lived intangible assets, depreciation and amortization, the valuation of
stock options, deferred income taxes and the fair value of non-controlling interests.
Cash and Cash Equivalents
For purposes of balance sheet presentation and
reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments
with an original maturity of less than 90 days to be cash and cash equivalents. The Company had no cash equivalents at February
28, 2017 and February 29, 2016.
Accounts Receivable
The Company extends credit to its
customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides for
estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the
Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors.
As the financial condition of these parties change, circumstances develop or additional information becomes available,
adjustments to the allowance for doubtful accounts may be required. The Company maintains reserves for potential credit
losses, and such losses traditionally have been within its expectations. The Company did not have accounts receivable,
therefore did not have an allowance for doubtful accounts as of February 28, 2017 and February 29, 2016.
Property and Equipment
All expenditures on the acquisition for property
and equipment are recorded at cost and capitalized as incurred, provided the asset benefits the Company for a period of more than
one year. Expenditures on routine repairs and maintenance of property and equipment are charged directly to operating expense.
The property and equipment is depreciated using the straight-line method based upon its estimated useful life after being placed
in service. The estimated useful life of computer equipment is 3 years. When equipment is retired, sold or impaired, the resulting
gain or loss is reflected in earnings. After the deconsolidation with RealBiz on October 31, 2014, the Company does not own property
and equipment. The Company incurred depreciation expense of $ -0- and $-0- for the years ended February 28, 2017 and February 29,
2016, respectively.
In accordance with Accounting Standards Codification
360-10, “Property, Plant and Equipment”, the Company periodically reviews its long- lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes
an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount
of impairment is measured as the difference between the asset’s estimated fair value and its book value. For the years ended
February 28, 2017 and February 29, 2016, the Company did not record impairment losses on any of its property and equipment.
Website Development Costs
The Company accounts for website development costs
in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred
in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage
that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.
All costs associated with the websites are subject to straight-line amortization over a three-year period.
Software Development Costs
The Company capitalizes internal software development
costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established
by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain
software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological
feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect
to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies.
Amortization of the capitalized software development costs begins when the product is available for general release to customers.
Capitalized costs are amortized based on the greater of (a) the ratio of current gross revenues to the total current and anticipated
future gross revenues, or (b) the straight-line method over the remaining estimated economic life of the product. For the year
ended February 28, 2017, all software has been placed in service and all costs associated with the software development have been
expensed.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill
and Other Intangible Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could
trigger an impairment review include the following:
1.
|
Significant underperformance compared to historical or projected future operating results;
|
2.
|
Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and
|
3.
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Significant negative industry or economic trends.
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When the Company determines that the carrying value
of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and
the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge.
The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management
to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining
whether an indicator of impairment exists and in projecting cash flows. The Company did not record an impairment charge on its
intangible assets during the years ended February 28, 2017 and February 29, 2016. Intangible assets that have finite useful lives
are amortized over their useful lives. The Company incurred amortization expense of $1,779,820 and $164,615 during the years ended
February 28, 2017 and February 29, 2016, respectively.
Convertible Debt Instruments
The Company records debt net of debt discount for
beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant
to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and
beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest
expense over the life of the debt.
Derivative Instruments
The Company enters into financing arrangements
that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company
accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments
and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard,
derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with
gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are
bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company
determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation
models, considering all of the rights and obligations of each instrument.
The Company estimates fair values of derivative
financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring
fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument,
the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding
warrants, the Company generally uses the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the
requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to determine the
fair value of these instruments. Estimating fair values of derivative financial instruments requires the development of significant
and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal
and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive
to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently
carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes.
Under the terms of this accounting standard, increases in the trading price of the Company’s common stock and increases in
fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in
the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result
in the application of non-cash derivative income.
Based upon ASC 815-25 the Company has adopted a
sequencing approach regarding the application of ASC 815-40 to its outstanding convertible debentures. Pursuant to the sequencing
approach, the Company evaluates its contracts based upon earliest issuance date.
Reclassification
For comparability, certain prior year
amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2017. The
reclassifications have no impact on net loss.
Earnings per Share
Basic earnings per share are computed by
dividing net income or loss by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock,
common stock equivalents and potentially dilutive securities outstanding during each period. On June 25, 2015, we effected a
1:50 reverse stock-split of all of our outstanding shares of common stock.
Revenue Recognition
We recognize revenue when
the customer has purchased the product, the occurrence of the earlier of date of travel or the date of cancellation has expired,
the sales price is fixed or determinable and collectability is reasonably assured. We account for sales incentives to customers
as a reduction of revenue at the time the revenue is recognized from the related product sale.
Revenue for customer
travel packages purchased directly from the Company are recorded gross (the amount paid to the Company by the customer is shown
as revenue and the cost of providing the respective travel package is recorded to cost of revenues).
We generate our revenues
from sales directly to customers as well as through other distribution channels of tours and activities at destinations throughout
the world as well as from customers for online advertising services related to the listing of their properties for rent, primarily
on a subscription basis, over a fixed-term. We also generate revenue from commissions on bookings or traveler inquiries on our
performance-based listings. Additional revenues are derived from the sales of and ancillary products and services.
Payments for tours or
activities and term-based paid subscriptions received in advance of services being rendered are recorded as deferred revenue and
recognized ratably on a straight-line basis over the listing period. Revenue for performance-based listings is calculated as a
percentage of the traveler booking or a fixed fee-per-inquiry stated in the arrangement and recognized when the service has been
performed or as the customers’ refund privileges lapse.
Cost of Revenue
Cost of revenue consists
of cost of the tours and activities, salaries, benefits and related expenses and stock-based compensation of the Company’s
customer service and web hosting personnel, merchant fees charged by credit card processors, costs associated with the hosting
of the Company’s websites, costs associated with payments under the rental guarantee and allocated facility expenses.
Selling and Promotions Expense
Selling and promotion expenses consist primarily
of advertising and promotional expenses, salary expenses associated with sales and marketing staff, expenses related to our participation
in industry conferences, and public relations expenses.
Advertising Expense
Advertising costs are charged to expense as incurred
and are included in selling and promotions expense in the accompanying consolidated financial statements. Advertising expense for
the years ended February 28, 2017 and February 29, 2016, was $176,715 and $21,924, respectively.
Share Based Compensation
The Company computes share based payments to employees
in accordance with Accounting Standards Codification 718-10 “Compensation” (ASC 718-10). ASC 718-10 establishes standards
for the accounting for transactions in which an entity exchanges its equity instruments for goods and services at fair value, focusing
primarily on accounting for transactions in which an entity obtains employees services in share-based payment transactions. It
also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair
value of an entity’s equity instruments or that may be settled by the issuance of those equity instruments. Equity instruments
issued to non-employees for goods or services are accounted for at fair value and marked to market until service is complete or
a performance commitment date is reached, whichever is earlier, in accordance with ASC 505-50.
Warrant Modifications
The Company treats a modification of the terms
or conditions of an equity award in accordance with ASC Topic 718-20-35-3 by treating the modification as an exchange of the original
award for a new award. In substance, the entity repurchases the original instrument by issuing a new instrument of equal or greater
value, incurring additional compensation cost for any incremental value. Incremental compensation cost shall be measured as the
excess, if any, of the fair value of the modified award determined in accordance with the provisions of this Topic over the fair
value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors
at that date.
Income Taxes
The Company accounts for income taxes pursuant
to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability
approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases
of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes
it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740
-10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of
the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the
Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25 Definition
of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the
purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the
completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of February
28, 2017, the Company’s income tax returns for tax years ending February 29, 2016 and February 28, 2015, 2014, 2013, and
2012 remain potentially subject to audit by the taxing authorities.
Monaker Group, Inc. follows the guidance of ASC
740, “Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts
of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating
loss carry-forwards. No current tax provision has been made in the accompanying statement of income (loss) because no taxes are
due currently or were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has
been recognized, as it is not deemed likely to be realized.
Fair Value of Financial Instruments
The Company has adopted the provisions of ASC Topic
820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures
about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure
fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes
between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy
consists of three levels:
Level 1: Observable inputs that reflect unadjusted
quoted prices for identical assets or liabilities traded in active markets.
Level 2: Inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs that are generally unobservable.
These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial instruments consist principally of cash,
accounts receivable, prepaid expenses, accounts payable, accrued liabilities and other current liabilities. The carrying amounts
of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term
nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining
maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any
significant currency or credit risks arising from these financial instruments (see Note 14– Fair Value Measurements).
Going Concern
As of February 28, 2017, and February 29, 2016,
the Company had an accumulated deficit of $100,659,632 and $93,562,357, respectively. The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern.
We have very limited financial resources. We currently
have a monthly cash requirement of approximately $300,000, exclusive of capital expenditures. We will need to raise substantial
additional capital to support the on-going operation and increased market penetration of our products including the development
of national advertising relationships, increases in operating costs resulting from additional staff and office space until such
time as we generate revenues sufficient to support itself. We believe that in the aggregate, we could require several millions
of dollars to support and expand the marketing and development of our travel products, repay debt obligations, provide capital
expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business,
and cover other operating costs until our planned revenue streams from travel products are fully-implemented and begin to offset
our operating costs. Our failure to obtain additional capital to finance our working capital needs on acceptable terms, or at all,
will negatively impact our business, financial condition and liquidity. As of February 28, 2017, we had $3,018,467 of current liabilities.
These conditions raise substantial doubt of our ability to continue as a going concern. We currently do not have the resources
to satisfy these obligations, and our inability to do so could have a material adverse effect on our business and ability to continue
as a going concern.
Management’s plans with regard to this going
concern are as follows: the Company will continue to raise funds with third parties by way of a public or private offering, and
management and members of the Board are working aggressively to increase the viewership of our products by promoting it across
other mediums which will result in higher revenues. The ability of the Company to continue as a going concern is dependent on the
Company’s ability to further implement its business plan and generate greater revenues. Management believes that the actions
presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company
to continue as a going concern.
Recent Accounting Pronouncements
In May 2014, the
FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of
revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard
will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either
the retrospective or cumulative effect transition method. The updated standard is effective for fiscal years, and interim
reporting periods within those years, beginning after December 15, 2017, and permits early adoption a year earlier,
after December 15, 2016. The Company has not yet selected a transition method and is currently evaluating the effect that the
updated standard will have on its consolidated financial statements and related disclosures.
Note 3 – Notes Receivable
On December 22, 2014, the Company advanced
$15,000 to a non-related third party debtor and signed a one year, six percent (6%) promissory note in the amount of $15,000. The
entire principal balance of this note was rolled into and became part of the consideration paid for the purchase of the Company’s
51% membership interest in Name Your Fee, LLC, including approximately $1,000,000 in intangible assets. The Company’s interest
in Name Your Fee, LLC was sold on May 16, 2016, to the same non-related third party, for cancellation of $45,000 in notes (including
the $15,000 note described above) and a promissory note in the amount of $750,000 (see also Note 5).
Note 4 – Investment in Equity Instruments
and Deconsolidation
We assess the potential impairment of our equity
method investments when indicators such as a history of operating losses, negative earnings and cash flow outlook, and the financial
condition and prospects for the investee’s business segment might indicate a loss in value. We have recognized an impairment
loss on investment in unconsolidated affiliate. At February 28, 2017, Monaker owned 44,470,101 shares of RealBiz Series A Preferred
Stock and 10,359,890 shares of RealBiz common stock, representing 27% ownership of RealBiz. This interest, along with a net receivable
balance due, has been written down to zero ($0) as of February 28, 2017 and February 29, 2016 to reflect the realizable value of
this investment and asset. On November 16, 2016, RealBiz notified Monaker that the Board of Directors of RealBiz voted to cancel
and retire all issued and outstanding shares of RealBiz Preferred Stock and all but 1,341,533 shares of common stock of RealBiz
held by Monaker. On January 18, 2017 RealBiz cancelled all shares of common stock of RealBiz held by Monaker. RealBiz’s announced
cancellation and retirement was without Monaker’s consent, and done in violation of Delaware law, federal law and the terms
of RealBiz’s preferred and common stock. We filed a complaint on November 30, 2016 (Monaker Group, Inc., f/k/a Next 1 Interactive,
Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs, Inc. and American Stock Transfer & Trust Company, LLC Case No.: 1:16-cv-24978-DLG),
seeking damages and injunctive and declaratory relief, arising from RealBiz’s declared cancellation and retirement of the
shares.
Note 5 – Acquisitions and Dispositions
On October 26, 2015, the
Company entered into a Plan of Merger Agreement with Always on Vacation, Inc. involving a merger of the Company’s then wholly-owned
subsidiary AOV Holding, Inc. (“AOV”) and Always On Vacation, Inc. which involved issuing 383,230 shares of AOV common
stock to the stockholders of Always On Vacation, Inc., effectively cancelling each share of capital stock of Always on Vacation,
Inc. As part of the sale of businesses and assets unrelated to the core travel sector, on January 22, 2016, the intellectual property
related to the travel sector (i.e. contracts, domains, trademark and platform) owned by Always On Vacation, Inc. were assigned
to Monaker. On January 23, 2016, the interest in Always On Vacation, Inc. (a media company) was sold through a Stock Purchase Agreement
to an unrelated third party for $10, plus such third party’s assumption of liabilities of Always On Vacation, Inc. As of
February 28, 2017, the value of the contracts, domains, trademark and platform were fully amortized.
On November 25,
2015, the Company entered into an agreement titled “The Intellectual Property License to Corporation by Licensor
Agreement” with CJ Software, Inc. for an internet-based, real-time specialty booking engine developed to consolidate
unused timeshare, fractional, and other specialty lodging rooms to be booked for nightly stays. The agreement provided for
CJ Software, Inc. to be paid $180,000 by way of the issuance of 45,000 shares of the Company’s common stock valued
at $4.00 per share, once this software/platform was fully operational, as a one-time lease payment for a
perpetual, unrestricted, non-exclusive, worldwide, royalty free license to use the software. In addition, the Company was to
employ one of its employees as an employee of Monaker and another as a consultant. This Agreement was terminated on December
1, 2016 and no shares were issued.
As part of the sale of businesses and assets unrelated
to the core travel sector, on January 22, 2016, the intellectual property related to the travel sector (i.e., the NextTrip.com
platform, Maupintour.com platform and Home & Away Club portal) owned by the Company’s television media entity (Next 1
Network, Inc.) were assigned to Monaker. The television media entity (Next 1 Network, Inc.) was sold pursuant to a Stock Purchase
Agreement dated January 23, 2016 to an unrelated third party for $10 plus its assumption of liabilities of Next 1 Network, Inc.
On May 16, 2016, the Company entered into a Membership
Interest Purchase Agreement for the sale of its 51% membership interest in Name Your Fee, LLC in exchange for a Promissory Note,
maturing on June 15, 2018, in the amount of $750,000 plus the cancellation of $45,000 in existing promissory notes due from the
purchaser. The Promissory Note does not accrue interest, is secured by the 51% membership interest in Name Your Fee, LLC and will
be repaid through 20% of the net earnings received in NameYourFee.com through maturity. The Note contains standard and customary
events of default. The principal amount of the note is due on June 15, 2018, provided that it will not be an event of default under
the note unless the note is not repaid within 60 days after such maturity date (i.e., by August 14, 2018).
On August 31, 2016, the Company entered into
a Marketing and Stock Exchange Agreement with Recruiter.com, Inc. whereby the Company issued to Recruiter.com, Inc., 75,000
shares of the Company’s restricted common stock valued at $1.50 per share, for a total of $112,500, in exchange for
2,220 shares of common stock of Recruiter.com, Inc. The acquisition of the 2,200 shares of common stock of
Recruiter.com, Inc. was written off to its realizable value of $0 as of February 28, 2017. Also, an additional 75,000
shares of the Company’s restricted common stock valued at $1.50 per share, for a total of $112,500, were issued for
advertising and marketing services to be performed by Recruiter.com, Inc. over the next 12 months, pursuant to the terms of
the agreement. The entire $112,500 was expensed during the year ended February 28, 2017.
Note 6 – Website Development Costs and
Intangible Assets
The following table sets forth the intangible assets,
both acquired and developed, including accumulated amortization as of February 28, 2017 and February 29, 2016:
|
|
February 28, 2017
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Useful Life
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
Website platform
|
|
1.0 years
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
|
$
|
—
|
|
Contracts, domains, customer lists
|
|
2.0 years
|
|
|
1,199,447
|
|
|
|
1,199,447
|
|
|
|
—
|
|
Website platform
|
|
3.0 years
|
|
|
37,657
|
|
|
|
37,657
|
|
|
|
—
|
|
Website development costs
|
|
2.0 years
|
|
|
181,730
|
|
|
|
181,730
|
|
|
|
—
|
|
Website development costs (not placed in service)
|
|
3.0 years
|
|
|
770,482
|
|
|
|
2,363
|
|
|
|
768,119
|
|
Web platform
|
|
4.0 years
|
|
|
598,099
|
|
|
|
598,099
|
|
|
|
—
|
|
Trademark
|
|
Indefinite
|
|
|
3,950
|
|
|
|
—
|
|
|
|
3,950
|
|
|
|
|
|
$
|
3,191,365
|
|
|
$
|
2,419,296
|
|
|
$
|
772,069
|
|
During the year ended February 28, 2017, the Company
incurred $3,950 in fees to register its trademark and $685,414 of additional website development costs for the NextTrip.com and
EXVG.com websites; these sites have not been placed in service as of February 28, 2017 and are capitalized. The Company also incurred
an additional $11,447 related to the contracts, domains and customers. It was determined that the term of the contracts have effectively
expired and the customer lists as well as the domains are of no value; therefore the contracts, domains and customer lists have
been fully amortized. Also the website platform form StingyTravel.com has been determined to be of no value and has been fully
amortized.
|
|
February 29, 2016
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Useful Life
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
Website platform
|
|
1.0 years
|
|
$
|
400,000
|
|
|
$
|
—
|
|
|
$
|
400,000
|
|
Contracts, domains, customer lists
|
|
2.0 years
|
|
|
1,188,000
|
|
|
|
—
|
|
|
|
1,188,000
|
|
Website platform
|
|
3.0 years
|
|
|
37,657
|
|
|
|
37,657
|
|
|
|
—
|
|
Website development costs
|
|
2.0 years
|
|
|
181,730
|
|
|
|
65,624
|
|
|
|
116,106
|
|
Website development costs (not placed in service)
|
|
3.0 years
|
|
|
85,068
|
|
|
|
2,363
|
|
|
|
82,705
|
|
Web platform
|
|
4.0 years
|
|
|
598,099
|
|
|
|
598,099
|
|
|
|
—
|
|
Software development (not placed in service)
|
|
3.0 years
|
|
|
915,392
|
|
|
|
77,117
|
|
|
|
838,275
|
|
|
|
|
|
$
|
3,405,946
|
|
|
$
|
780,860
|
|
|
$
|
2,625,086
|
|
During the year ended February 29, 2016, the Company
acquired the contracts, domains and customers of Always On Vacation, Inc. as well as the website platform form StingyTravel.com.
These assets were placed in service on January 23, 2016 and were being amortized over a three year period.
This capitalization of these costs fall within
the scope of ASC 350-50-25-15 wherein costs of upgrades and enhancements should be capitalized as they will result in added functionality
of the website.
Intangible assets are amortized on a straight-line
basis over their expected useful lives, estimated to be 4 years, except for the website(s), which is 3 years. Amortization expense
related to website development costs and intangible assets was $1,779,820 and $164,615 for the years ended February 28, 2017 and
February 29, 2016, respectively.
Note 7 – Convertible Promissory Notes
The Company has a convertible
promissory note, with an interest rate of 6% per annum, maturing December 1, 2017 and with a fixed conversion rate of $5.00
per share. During the years ended February 28, 2017 and February 29, 2016, the Company recognized interest expense of
$248,200 and $384,899, respectively.
The table below summarizes the convertible promissory
notes as of February 28, 2017.
|
|
February 28, 2017
|
|
|
|
Non Related
Party
|
|
|
Related
Party
|
|
|
Total
|
|
Principal
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
249,582
|
|
|
$
|
1,409,326
|
|
|
$
|
1.658.908
|
|
Additions:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
249,582
|
|
|
|
1,409,326
|
|
|
|
1,658,908
|
|
Subtractions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments to note holder
|
|
|
249,582
|
|
|
|
—
|
|
|
|
249,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
—
|
|
|
$
|
1,409,326
|
|
|
$
|
1,409,326
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible promissory notes
|
|
$
|
—
|
|
|
$
|
1,409,326
|
|
|
$
|
1,409,326
|
|
Adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Carrying value
|
|
$
|
—
|
|
|
$
|
1,409,326
|
|
|
$
|
1,409,326
|
|
Principal past due and in default
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The discount is amortized on a straight line basis
from the dates of issuance until the stated redemption date of the debts. During the years ended February 28, 2017 and February
29, 2016, the Company recorded debt discount amortization expense as interest expense in the amount of $-0- and $-0-, respectively.
Mr. Mark Wilton is a greater than 5% shareholder
and is treated as a related party. The classification of the convertible promissory note changed from non-related party to related
party in the amount of $1,409,326 during the year ended February 28, 2017.
The table below summarizes the convertible promissory
notes as of February 29, 2016.
|
|
February 29, 2016
|
|
|
|
Non Related
Party
|
|
|
Related
Party
|
|
|
Total
|
|
Principal
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
756,683
|
|
|
$
|
7,096,703
|
|
|
$
|
7,853,386
|
|
Additions:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
756,683
|
|
|
|
7,096,703
|
|
|
|
7,853,386
|
|
Subtractions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion to common shares
|
|
|
194,584
|
|
|
|
5,587,377
|
|
|
|
5,781,961
|
|
Payments to note holder
|
|
|
28,000
|
|
|
|
100,000
|
|
|
|
128,000
|
|
Entity sold
|
|
|
284,517
|
|
|
|
—
|
|
|
|
284,517
|
|
|
|
|
507,101
|
|
|
|
5,687,377
|
|
|
|
6,194,478
|
|
Ending balance
|
|
$
|
249,582
|
|
|
$
|
1,409,326
|
|
|
$
|
1,658,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible promissory notes
|
|
$
|
249,582
|
|
|
$
|
1,409,326
|
|
|
$
|
1,658,908
|
|
Adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Carrying value
|
|
$
|
249,582
|
|
|
$
|
1,409,326
|
|
|
$
|
1,658,908
|
|
Principal past due and in default
|
|
$
|
249,582
|
|
|
$
|
—
|
|
|
$
|
249,582
|
|
During the year ended February 29, 2016, the Company:
|
●
|
Issued 276,747 shares of common stock upon conversion of $194,584 of principal held by a note holder.
|
|
●
|
Issued
1,902,046 shares of common stock upon conversion of $5,637,377 of principal held by entities of Donald Monaco, a
director of the Company, and Mr. Mark Wilton.
|
|
●
●
|
On January 23, 2016, the Company sold its subsidiary
Next 1 Network, Inc. and $284,517 of promissory notes were included in this sale.
The Company paid $28,000 towards the principal
held by a noteholder and $100,000 towards the principal held by an entity of Donald Monaco, a director of the Company.
|
Note 8 – Notes Payable
The following table sets forth the notes payable
as of February 28, 2017 and February 29, 2016:
|
|
Principal
|
|
|
|
February 28, 2017
|
|
|
February 29, 2016
|
|
On September 6, 2011, the Company extended a note in the amount of $785,000, then in default, until February 1, 2013. Beginning on October 1, 2011, the Company was obligated to make payments of $50,000 due on the first day of each month. The first $185,000 in payments was to be in cash and the remaining $600,000 was to be made in cash or common stock. On February 15, 2012, the note-holder assigned $225,000 of its $785,000 outstanding promissory note to a non-related third party investor and the Company issued a new convertible promissory note for the same value. As part of the sale of businesses and assets unrelated to the core travel sector, the television media entity (Next 1 Network, Inc.) was sold and this promissory note was not assumed by the purchaser as part of the Stock Purchase Agreement dated January 23, 2016. The Company has assumed this note related to the sold entity and settled the outstanding debt on November 16, 2016, through the issuance of 255,041 shares of the Company’s common stock at $2.25 per share for the principal plus 680 shares of the Company’s common stock at $2.25 per share for the accrued interest.
|
|
$
|
—
|
|
|
$
|
573,842
|
|
|
|
|
|
|
|
|
|
|
On August 16, 2004, the Company entered into a promissory note with an unrelated third party in the amount of $500,000. The note bears interest at 7% per year, matured in March 2011 and was payable in quarterly installments of $25,000. As part of the sale of businesses and assets unrelated to the core travel sector, the television media entity (Next 1 Network, Inc.) was sold and this promissory note was not assumed by purchaser as part of the Stock Purchase Agreement dated January 23, 2016. The Company assumed this note related to the sold entity on June 24, 2016 and this promissory note was settled with full release for the amount of $40,000.
|
|
|
—
|
|
|
|
137,942
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
711,784
|
|
|
|
|
|
|
|
|
|
|
Interest charged to operations relating to the
above notes was $27,353 and $2,407, respectively for the years ended February 28, 2017 and February 29, 2016. The Company
has accrued interest as of February 28, 2017 and February 29, 2016 of $-0- and $162,521, respectively.
On January 23, 2016, as part of the sale of businesses
and assets unrelated to the core travel sector, the television media entity (Next 1 Network, Inc.) was sold and these promissory
notes (amounting to $711,784) were not assumed by the purchaser as part of the Stock Purchase Agreement dated January 23, 2016.
The Company assumed these notes that were in default
related to the sold entity and negotiated a settlement of the assumed above-noted notes as of February 28, 2017.
Note 9 – Line of Credit and Other
Notes Payable
The following table sets forth the line of
credit and other notes payable as of February 28, 2017 and February 29, 2016:
|
|
Principal
|
|
|
|
February 28, 2017
|
|
|
February 29, 2016
|
|
Line of credit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 15, 2016, we entered into a revolving line of credit agreement with Republic Bank, Inc. of Duluth, Minnesota, in the maximum amount of $1,000,000. Amounts borrowed under the line of credit accrue interest at the Wall Street Journal U.S. Prime Rate plus 1% (updated daily until maturity), payable monthly in arrears beginning on July 15, 2016. Any amounts borrowed under the line of credit are due on June 15, 2017. On December 22, 2016, the revolving line of credit was increased to $1,200,000; all terms of the revolving line of credit remain unchanged.
|
|
$
|
1,193,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has a demand loan with a stated interest rate of 6% per annum, due for funds received from In Room Retail, Inc. which is owned by William Kerby, CEO and Chairman of the Company. This loan was repaid in cash on November 4, 2016.
|
|
$
|
—
|
|
|
|
15,919
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,193,000
|
|
|
$
|
15,919
|
|
Interest charged to operations relating to these
notes was $29,822 and $2,100, respectively for the years ended February 29, 2016 and February 28, 2015. The Company
has accrued interest as of February 28, 2017 and February 29, 2016 of $-0- and $-0-, respectively.
Note 10 - Due to/from affiliates
Through October 2015, the Company received and/or
made advances to/from its unconsolidated affiliated Company, RealBiz Media Group, Inc. resulting in a net receivable due from RealBiz
in excess of $11.2 million. At February 28, 2017, Monaker owned 44,470,101 shares of RealBiz Series A Preferred Stock and 10,359,890
shares of RealBiz common stock, representing 27% ownership of RealBiz. The equity interest, along with a net receivable balance
due from the above-mentioned transactions, has been written down to zero ($0) as of February 28, 2017 and February 29, 2016
to reflect the realizable value of this investment and asset.
Note 11 – Stockholders’ Deficit
Preferred stock
The aggregate number of shares of preferred stock
that the Company is authorized to issue is up to One Hundred Million (100,000,000), with a par value of $0.00001 per share (“the
Preferred Stock”) with the exception of Series A Preferred Stock shares having a $0.01 par value. The Preferred Stock may
be divided into and issued in series. The Board of Directors of the Company is authorized to divide the authorized shares of Preferred
Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all
other series and classes. The Board of Directors of the Company is authorized, within any limitations prescribed by law and the
articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of
the shares of any series of Preferred Stock.
On August 26, 2016, we converted all of our outstanding
Series B (110,200 shares), Series C (13,100 shares) and Series D (110,156 shares) Preferred Stock, into an aggregate of 444,712
shares of our common stock, pursuant to certain special conversion terms offered in connection therewith and the mandatory conversion
terms thereof.
Additionally, stockholders holding 15,000 shares
of our Series B Convertible Preferred Stock and 22,000 shares of our Series D Convertible Preferred Stock requested the conversion
of such shares into 2,233,260 shares of RealBiz common stock. Pursuant to the customary practice of the Company and RealBiz, the
Company first requested that RealBiz’s transfer agent convert shares of RealBiz Preferred A owned by the Company, into RealBiz
common stock as provided by the designation of the RealBiz preferred stock. This request was denied by RealBiz and RealBiz’s
transfer agent. The Company then requested that the Company’s transfer agent cancel the converted shares and that RealBiz’s
transfer agent which is also Monaker’s transfer agent (American Stock Transfer) transfer shares of common stock of RealBiz
held by the Company to such shareholders to satisfy the conversion obligations. To date, RealBiz has refused to recognize or effect
the transfers. The Company has provided to RealBiz and American Stock Transfer all necessary documents and affidavits to execute
the transfer. The Preferred Stock Series B and D shares related to the conversion into RealBiz common shares have been retired
and the number of shares of investment in RealBiz common stock have been reduced by 2,233,260 shares. On November 16, 2016, RealBiz
notified Monaker that the Board of Directors of RealBiz voted to cancel and retire all issued and outstanding shares of RealBiz
Preferred Stock and all but 1,341,533 shares of common stock of RealBiz held by Monaker. On January 18, 2017 RealBiz cancelled
all shares of common stock of RealBiz held by Monaker. RealBiz’s announced cancellation and retirement was without Monaker’s
consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s preferred and common stock. We filed
a complaint on November 30, 2016 (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs,
Inc. and American Stock Transfer & Trust Company, LLC Case No.: 1:16-cv-24978-DLG), seeking damages and injunctive and declaratory
relief, arising from RealBiz’s declared cancellation and retirement of the shares.
All Preferred Stock Series B, C and D shares have
been retired. The Series A Preferred Stock have not been retired and William Kerby, our Chief Executive Officer and Chairman, beneficially
owns 794,611 shares (or 43% of the outstanding Preferred Stock Series A shares) and Donald Monaco, our Director, beneficially owns
1,075,000 shares (or 57% of the outstanding Series A Preferred Stock shares).
Series A Preferred Stock
The Company has authorized and designated 3,000,000
shares of Preferred Stock as Series A 10% Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series
A Preferred Stock”). The holders of record of shares of Series A Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the shareholders of the Company and shall be entitled to one hundred (100) votes for each share of Series
A Preferred Stock.
Per the terms of the Amended and Restated Certificate
of Designations, subject to the availability of authorized and unissued shares of Series A Preferred Stock, the holders of Series
A Preferred Stock may, by written notice to the Company:
|
●
|
elect to convert all or any part of such holder’s shares of Series A Preferred Stock into common stock at a conversion rate of the lower of:
|
|
|
(a) $25.00 per share; or
|
|
|
(b) at the lowest price the Company has issued stock as part of a financing; and
|
|
●
|
convert all or part of such holder’s shares (excluding any shares issued pursuant to conversion of unpaid dividends) into debt obligations of the Company, secured by a security interest in all of the assets of the Company and its subsidiaries, at a rate of $25.00 of debt for each share of Series A Preferred Stock.
|
On July 9, 2013, the Company amended the Certificate
of Designations for the Company’s Series A Preferred Stock to grant to a holder of the Series A Preferred Stock the option
to:
|
●
|
elect to convert all or any part of such holder’s shares of Series A Preferred Stock into shares of the Company’s Series C Convertible Preferred Stock, par value $0.00001 per share (“Series C Preferred Stock”), at a conversion rate of five (5) shares of Series A Preferred Stock for every one (1) share of Series C Preferred Stock; or to allow
|
|
●
|
conversion into common stock at the lowest price the Company has issued stock as part of a financing to include all financings such as new debt and equity financing and stock issuances as well as existing debt conversions into stock.
|
On February 28, 2014, the Company’s Series
A Preferred Stock shareholders agreed to authorize a change to the Certificate of Designations of the Series A Preferred Stock
in Nevada to lock the conversion price to the lower of (a) a fixed price of $0.50 per share; and (b) the lowest price the Company
has issued stock as part of a financing after January 1, 2006. Accounting Standards Codification subtopic 815-40, Derivatives and
Hedging; Contracts in Entity’s own Equity (“ASC 815-40”) became effective for us on March 1, 2010. The Company’s
Series A (convertible) Preferred Stock had certain reset provisions that require the Company to reduce the conversion price of
the Series A (convertible) Preferred Stock if we issue equity at a price less than the conversion price. Upon the effective date,
the provisions of ASC 815-40 required a reclassification to liability based on the reset feature of the agreements if the Company
sells equity at a price below the conversion price of the Series A Preferred Stock. In accordance with ASC 815-40, the Company
records the changes in the fair value of the derivative liability as non-operating, non-cash income or expense. However, the reset
provision was removed thereby eliminating the derivative liability as of February 28, 2014; therefore the change in fair value
of the Series A Preferred Stock derivative liability as of November 30, 2016 and February 29, 2016 resulted in non-operating income
of $0 and $0, respectively.
In the event of any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary (any of the foregoing, a “liquidation”), holders of Series
A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company
to the holders of the common Stock or any other series of Preferred Stock by reason of their ownership thereof an amount per share
equal to $1.00 for each share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series
A Preferred Stock held by each such holder, plus the amount of accrued and unpaid dividends thereon (whether or not declared) from
the beginning of the dividend period in which the liquidation occurred to the date of liquidation.
During the year ended February 28, 2017, there
were no transactions with regards to Series A Preferred Stock shares.
Dividends in arrears on the outstanding
Series A Preferred Stock shares total $1,025,233 and $838,275 as of February 28, 2017 and February 29, 2016, respectively.
The Company had 1,869,611 shares of Series A Preferred Stock issued and outstanding as of February 28, 2017 and February 29,
2016.
Series B Preferred Stock
The Company has authorized and designated 3,000,000
shares of Preferred Stock as Non-Voting Series B 10% Cumulative Convertible Preferred Stock with a par value of $0.00001 per share
(the “Series B Preferred Stock”). The holders of Series B Preferred Stock may elect to convert all or any part of such
holder’s shares into:
|
●
|
common stock on a one for fifty basis, or
|
|
●
|
shares of RealBiz’s common stock at $0.05 per share.
|
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a “liquidation”), the holders are entitled to receive out of the
assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value, plus any accrued and unpaid dividends
thereon and any other fees or liquidated damages owing thereon, for each share of then outstanding Preferred Stock before any distribution
or payment shall be made to the holders of any junior securities (common stock), and if the assets of the Company shall be insufficient
to pay in full such amounts, then the entire assets to be distributed to the holders shall be ratably distributed among the holders
of all preferred stock in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full.
During the year ended February 28, 2017:
|
●
|
110,200 shares of Series B Preferred Stock were converted into 220,400 shares of common stock of Monaker at $2.50 per share, based on the $5 per share stated value of the Series B Preferred Stock.
|
|
●
|
15,000 shares of Series B Preferred Stock were converted into 1,500,000 shares of common stock of RealBiz at $0.05 per share, based on the $5 per share stated value of the Series B Preferred Stock.
|
Dividends in arrears on the outstanding Series
B Preferred Stock total $0 and $182,782 as of February 28, 2017 and February 29, 2016, respectively. The Company had 0 and 125,200
shares of Series B Preferred Stock issued and outstanding as of February 28, 2017 and February 29, 2016, respectively.
Series C Preferred Stock
The Company has authorized and designated 3,000,000
shares of Preferred Stock as Non-Voting Series C 10% Cumulative Convertible Preferred Stock with a par value of $0.00001 per share
(the “Series C Preferred Stock”). The holders of Series C preferred stock may elect to convert all or any part of such
holder’s shares into:
|
●
|
common stock on a 2.5 for one basis, or
|
|
●
|
shares of RealBiz’s common stock at $0.10 per share.
|
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a “liquidation”), the holders are entitled to receive out of the
assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value of $5 per share, plus any accrued
and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of then outstanding Preferred
Stock before any distribution or payment is to be made to the holders of any junior securities (common stock), and if the assets
of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders are to be
ratably distributed among the holders of all preferred stock in accordance with the respective amounts that would be payable on
such shares if all amounts payable thereon were paid in full.
During the year ended February 28, 2017:
|
●
|
13,100 shares of Series C Preferred Stock were converted into 26,000 shares of common stock of Monaker at $250.00 per share, based on the $5 per share stated value of the Series C Preferred Stock.
|
Dividends in arrears on the outstanding Series
C Preferred Stock shares total $0 and $8,915 as of February 28, 2017 and February 29, 2016, respectively. The Company had 0 and
13,100 Series C Preferred Stock shares issued and outstanding as of February 28, 2017 and February 29, 2016, respectively.
Series D Preferred Stock
The Company has authorized and designated 3,000,000
shares of Preferred Stock as Non-Voting Series D 10% Cumulative Convertible Preferred Stock with a par value of $0.00001 per share
(the “Series D Preferred Stock”). The holders of Series D preferred stock may elect to convert all or any part of such
holder’s shares into:
|
●
|
common stock on a 2.5 for one basis, or
|
|
●
|
shares of RealBiz common stock at $0.15 per share.
|
On July 9, 2014, the Company filed an Amendment
to its Series D Certificate of Designation with the Secretary of State of the State of Nevada to change the conversion price from
$250 to $12.50 per share.
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a “liquidation”), the holders are entitled to receive out of the
assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value of $5 per share, plus any accrued
and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of then outstanding Preferred
Stock before any distribution or payment is to be made to the holders of any junior securities (common stock), and if the assets
of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders are to be
ratably distributed among the holders of all preferred stock in accordance with the respective amounts that would be payable on
such shares if all amounts payable thereon were paid in full.
On October 2, 2012, the Company issued 380,000
shares of Series D Preferred stock as part of the October 2, 2012 exchange of securities agreement between the Company and Acknew
Investments, Inc. (“Acknew”), for the acquisition of the entity that eventually became RealBiz Media Group, Inc. (RealBiz)
and then and now constitutes significant operations of RealBiz, a holder of Class A common shares of RealBiz Holdings, Inc., which
contained a “ratchet provision”: If, at any time while Acknew is a holder of Series D Preferred Stock and the Retirement
Obligation (requiring the Company to pay out of 50% of all net profits from the Company or 50% of any new funding received by the
Company from September 21, 2012, until such time as the $700,000 of the Company’s Series D Preferred Stock shares owned by
Acknew are redeemed by the Company) remains not fully satisfied, the Company sells or issues any common stock of the Company at
an effective price per share that is lower than the then-effective conversion price (any such issuance being referred to as a “Dilutive
Issuance”), then the conversion prices for the Series D Preferred Stock held by Acknew is reduced to equal the product obtained
by multiplying (1) the then effective conversion price by (2) a fraction, the numerator of which is the sum of the number of total
shares of common stock outstanding immediately prior to the Dilutive Issuance plus the number of shares of common stock which the
aggregate consideration received by the Company in the Dilutive Issuance would purchase at the then-effective conversion price;
and the denominator of which is the number of shares of common stock outstanding immediately after the Dilutive Issuance.
During the year ended February 28, 2017:
|
●
|
110,156 shares of Series D Preferred Stock were converted into 198,312 shares of common stock of Monaker at $2.50 per share, based on the $5 per share stated value of the Series D Preferred Stock.
|
|
●
|
22,000 shares of Series D Preferred Stock were converted into 733,260 shares of common stock of RealBiz at $0.15 per share, based on the $5 per share stated value of the Series D Preferred Stock.
|
Dividends in arrears on the outstanding Series
D Preferred Stock shares total $-0- and $138,188 as of February 28, 2017 and February 29, 2016, respectively. The Company had -0-
and 132,156 Series D Preferred Stock shares issued and outstanding as of February 28, 2017 and February 29, 2016, respectively.
Common Stock
On October 28, 2011, the Board and the holders
of a majority of the voting power of our shareholders approved an amendment to our Articles of Incorporation to increase our authorized
shares of common stock from 200,000,000 to 500,000,000. On February 13, 2012, the Board and the holders of a majority of the voting
power of our shareholders approved an amendment to our Articles of Incorporation to increase our authorized shares of common stock
from 500,000,000 to 2,500,000,000. The increase in our authorized shares of common stock became effective upon the filing of the
amendment(s) to our Articles of Incorporation with the Secretary of State of the State of Nevada.
On May 2, 2012, the Board consented to (i) effect
a 1 for 500 reverse split of the Company’s common stock and (ii) reduce the number of authorized shares from 2,500,000,000
to 5,000,000. Such actions became effective upon the filing of the amendment to our Articles of Incorporation with the Secretary
of State of the State of Nevada. The consolidated financial statements have been retroactively adjusted to reflect this reverse
stock split.
On June 26, 2012, the Board and the holders of
a majority of the voting power of our shareholders approved an amendment to our Articles of Incorporation to increase our authorized
shares of common stock from 5,000,000 shares to 500,000,000 shares.
On June 25, 2015,
the Board consented
to (i) effect a 1-to-50 reverse split of the Company’s common stock and (ii) change the name of the Company from Next 1 Interactive,
Inc. to Monaker Group, Inc. Such actions became effective upon the filing of the amendment to our Articles of Incorporation with
the Secretary of State of the State of Nevada. The unaudited consolidated financial statements have been retroactively adjusted
to reflect this reverse stock split.
During the year ended February 28, 2017, the Company:
|
●
|
Sold 2,826,365
shares of restricted common stock and warrants for $4,329,939 in proceeds in private transactions.
|
|
●
|
Issued 800,844 shares of
restricted common stock and warrants valued at $2,165,578 for stock compensation.
|
|
●
|
Issued 347,720
shares of restricted common stock valued at $664,373 for conversion of notes payable and accrued interest
thereon.
|
|
●
|
On September 19, 2016, Recruiter.com was issued 75,000 shares of restricted common stock valued at $112,500 for the acquisition of 1.5% of Recruiter.com. As of November 30, 2016, the value of this investment was written down to $0 to reflect the market value of the investment.
|
|
●
|
Issued 4,579 shares of common stock for acquisitions valued at $11,447.50.
|
During the year ended February 29, 2016, the Company:
|
●
|
Sold 1,102,000 shares of common stock for $2,276,722 in proceeds in private transactions.
|
|
●
|
455,000 shares of common stock were issued for acquisitions valued at $1,188,001.
|
|
|
|
|
●
|
189,000 shares of common stock were issued as compensation for services valued at $1,019,384.
|
|
|
|
|
●
|
1,000,000 shares of common stock were issued for assets valued at $56,000.
|
|
|
|
|
●
|
1,096, 994 shares of preferred stock were converted into 1,809,000 shares of common stock.
|
|
|
|
|
●
|
1,950,000 shares of common stock were issued for the conversion of debt valued at $8,138,169.
|
|
|
|
|
●
|
The Company filed an Amendment to its Articles of Incorporation and effected a 1-for-50 reverse stock split.
|
The Company had 11,133,938 and 6,686,540 shares
issued and outstanding as of February 28, 2017 and February 29, 2016, respectively.
Common Stock Warrants
The following table sets forth common stock purchase
warrants outstanding as of February 28, 2017, and February 29, 2016, and changes in such warrants outstanding for the years ending
February 28, 2017 and February 29, 2016:
|
|
Warrants
|
|
|
Weighted
Average Exercise
|
|
Outstanding, February 28, 2015
|
|
|
491,965
|
|
|
$
|
1.26
|
|
Warrants granted
|
|
|
1,350,130
|
|
|
$
|
1.02
|
|
Warrants exercised/forfeited/expired
|
|
|
(386,043
|
)
|
|
$
|
(0.90
|
)
|
Outstanding, February 29, 2016
|
|
|
1,456,052
|
|
|
$
|
1.56
|
|
Warrants granted
|
|
|
2,463,707
|
|
|
$
|
1.64
|
|
Warrants exercised/forfeited/expired
|
|
|
(1,899,671
|
)
|
|
$
|
(1.06
|
)
|
Outstanding, February 28, 2017
|
|
|
2,020,088
|
|
|
$
|
2.23
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable upon exercise of warrants
|
|
|
2,020,088
|
|
|
$
|
2.23
|
|
|
|
|
Common Stock Issuable Upon Exercise of
Warrants Outstanding
|
|
|
Common Stock Issuable
Upon Warrants
Exercisable
|
|
Range of
Exercise
Prices
|
|
|
Number
Outstanding at
February 28,
2017
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable at
February 28,
2017
|
|
|
Weighted
Average
Exercise
Price
|
|
$
|
0.01
|
|
|
|
253
|
|
|
|
1.50
|
|
|
$
|
0.01
|
|
|
|
253
|
|
|
$
|
0.01
|
|
$
|
0.50
|
|
|
|
46,508
|
|
|
|
4.66
|
|
|
$
|
0.50
|
|
|
|
46,508
|
|
|
$
|
0.50
|
|
$
|
1.25
|
|
|
|
93,595
|
|
|
|
2.26
|
|
|
$
|
1.25
|
|
|
|
93,595
|
|
|
$
|
1.25
|
|
$
|
1.50
|
|
|
|
322,972
|
|
|
|
1.67
|
|
|
$
|
1.50
|
|
|
|
322,972
|
|
|
$
|
1.50
|
|
$
|
2.00
|
|
|
|
1,258,000
|
|
|
|
2.21
|
|
|
$
|
2.00
|
|
|
|
1,258,000
|
|
|
$
|
2.00
|
|
$
|
2.50
|
|
|
|
48,760
|
|
|
|
3.30
|
|
|
$
|
2.50
|
|
|
|
48,760
|
|
|
$
|
2.50
|
|
$
|
3.00
|
|
|
|
200,000
|
|
|
|
2.25
|
|
|
$
|
3.00
|
|
|
|
200,000
|
|
|
$
|
3.00
|
|
$
|
4.00
|
|
|
|
50,000
|
|
|
|
1.00
|
|
|
$
|
4.00
|
|
|
|
50,000
|
|
|
$
|
4.00
|
|
|
|
|
|
|
2,020,088
|
|
|
|
|
|
|
$
|
1.85
|
|
|
|
2,020,088
|
|
|
$
|
1.85
|
|
At February 28, 2017, there were 2,020,088 warrants
outstanding with a weighted average exercise price of $1.85 and weighted average life of 2.23 years.
At February 29, 2016, there were 1,456,052 warrants
outstanding with a weighted average exercise price of $1.56 and weighted average life of 0.94 years.
During the year ended February 28, 2017, the Company
granted:
|
●
|
warrants to purchase 1,661,360 shares of common stock in connection with subscriptions; and
|
|
●
|
warrants to purchase 802,347 shares of common stock in consideration for consulting fees.
|
On January 5, 2017, we entered into an employment
agreement with an employee of the Company, whereby the employee agreed to provide management and financial/investor relation services
to the Company for a term of one year, cancellable by either party with 30 days prior written notice, in consideration for $10,000
per month and the grant of warrants to purchase (a) 100,000 shares of the Company’s common stock, which will vest and be
exercisable at such time as the Company successfully up lists to the NYSE MKT or the NASDAQ Capital Market, and have an exercise
price of $3 per share and cashless exercise rights; (b) 50,000 shares of the Company’s common stock, which will vest and
be exercisable upon the earlier to occur of (i) the second year of the term of such warrants; (ii) when the institutional ownership
of the Company’s totals 10% or more of the Company’s outstanding common stock, and have an exercise price of $4 per
share and cashless exercise rights; and (c) 50,000 shares of the Company’s common stock, which will vest and be exercisable
upon the earlier to occur of (i) the second year of the term of such warrants; (ii) when the institutional ownership of the Company’s
totals 20% or more of the Company’s outstanding common stock, and have an exercise price of $5 per share and cashless exercise
rights, as well as certain other to be determined fees in the event the Company undertakes certain transactions in the future.
All of the warrants vest immediately in the event the Company is acquired and have a term through December 31, 2019.
Common Stock Options
On October 28, 2009, the shareholders approved
the Monaker Group, Inc. (formerly known as Next 1 Interactive, Inc.) 2009 Long-Term Incentive Plan (the “2009 Plan”)
at the annual shareholders meeting. Under the 2009 Plan, 9,000 shares of common stock are reserved for issuance on the effective
date of the 2009 Plan. In the fiscal year ending February 29, 2016 this plan was eliminated and the 4,050 ten (10) year stock options
previously issued were cancelled. The options had an exercise price of $7.25 per share and an intrinsic value of $-0-.
Compensation expense relating to stock options
granted during the years ended February 28, 2017 and February 29, 2016, was $-0- .
Related Party Transactions
On October 1, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, subscribed for $250,000 of units
(100,000 total units) in our offering of up to $750,000 of units of the Company, each comprised of 1 share of common stock and
1 cashless warrant to purchase one share of common stock at an exercise price of $1.50 per share.
On November 11, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, subscribed for $250,000 of units
(100,000 total units) in our offering of up to $750,000 of units of the Company, each comprised of 1 share of common stock and
1 cashless warrant to purchase one share of common stock at an exercise price of $1.50 per share.
On November 13, 2015, Mark Wilton, a greater than
5% shareholder of the Company, converted 30,000 shares, at $5.00 per share, of Series B Preferred Stock and was issued 60,000 shares
of restricted common stock.
On November 13, 2015, Adam Friedman, our former
CFO of the Company, converted 26,200 shares, at $5.00 per share, of Series C Preferred Stock and was issued 52,400 shares of restricted
common stock.
On November 13, 2015, Doug Checkeris, Director
of the Company, converted 50,000 shares, at $5.00 per share, of Series C Preferred Stock and was issued 100,000 shares of restricted
common stock.
On November 13, 2015, Adam Friedman, former CFO
of the Company, converted 15,000 shares, at $5.00 per share, of Series D Preferred Stock and was issued 30,000 shares of restricted
common stock.
On November 13, 2015, Pat LaVecchia, Director of
the Company, converted 61,800 shares, at $5.00 per share, of Series C Preferred Stock and was issued 123,600 shares of restricted
common stock.
On November 17, 2015, 30,000 shares of common stock
were issued to William Kerby, CEO and Chairman of the Company, upon conversion of 15,000 shares of Series A Preferred Stock at
$5.00 per share.
On November 25, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, subscribed for $250,000 of units
(100,000 total units) in our offering of up to $750,000 of units of the Company, each comprised of 1 share of common stock and
1 cashless warrant to purchase one share of common stock at an exercise price of $1.50 per share.
On November 25, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company, converted outstanding convertible
promissory notes of $75,000 and Donald P Monaco Insurance Trust, of which Donald Monaco is the trustee and a Director of the Company,
converted outstanding convertible promissory notes of $325,000 for a combined, total of $400,000 in principal and $165,731 of accrued
interest, into 226,292 shares of the Company’s common stock.
On November 25, 2015, Monaco Investment Partners
II, LP, of which Donald Monaco is the managing general partner and a Director of the Company converted outstanding convertible
promissory notes totaling $575,000 in principal and $189,384 of accrued interest into 305,754 shares of the Company’s common
stock.
On December 17, 2015, William Kerby, CEO and Chairman
of the Company, converted 35,000 shares, at $5.00 per share, of Series C Preferred Stock and was issued 70,000 shares of restricted
common stock.
On January 22, 2016, Donald P Monaco Insurance
Trust, of which Donald Monaco is the trustee and a Director of the Company, subscribed for $600,000 of units (240,000 total units)
in our offering of up to $600,000 of units of the Company, each comprised of 1 share of common stock and 1 cashless warrant to
purchase one share of common stock at an exercise price of $1.50 per share.
On March 15, 2016, Stephen Romsdahl, a greater
than 5% shareholder of the Company, subscribed for $120,000 of units (48,000 total units) in our offering of up to $400,000 of
units of the Company, each comprised of 1 share of common stock and 2 Special Exchange warrants to purchase one share of common
stock at an exercise price of $0.25 per share.
On March 17, 2016, Mark Wilton, a greater than
5% shareholder of the Company, subscribed for $60,000 of units (24,000 total units) in our offering of up to $400,000 units of
the Company, each comprised of 1 share of common stock and 2 Special Exchange warrants to purchase one share of common stock at
an exercise price of $0.25 per share.
On May 3, 2016, Monaco Investment Partners II,
L.P, of which Donald Monaco is the managing general partner and a Director of the Company, exercised warrants to purchase 300,000
shares of common stock at an exercise price of $1.50 per share.
On June 1, 2016, the Company received $90,000 in
proceeds from Donald P Monaco Insurance Trust (whose trustee is Donald Monaco a director of Monaker) and issued 60,000 common shares
in connection with a partial warrant exercise for $1.50 per share.
On June 2, 2016, the Company borrowed three
hundred thousand dollars ($300,000) from the Donald P. Monaco Insurance Trust (“Trust”), which was evidenced by a Promissory
Note (“Note”) in the principal amount of three hundred thousand dollars ($300,000), which accrues interest at the rate
of 6% per annum (12% upon the occurrence of an event of default). All principal, interest and other sums due under the Note is
due and payable on the earlier of (a) the date the operations of NextTrip.com generate net revenues equal to $300,000; (b) the
date the Company enters into an alternate financing in excess of $300,000; or (c) August 1, 2016. The Note contains standard and
customary events of default. Donald P. Monaco, a member of our Board of Directors, is the trustee of the Trust. This Note may be
prepaid in whole or in part at any time, without penalty or premium. On June 24, 2016, we repaid this Note.
Messrs. Donald P. Monaco, Pat LaVecchia, Douglas
Checkeris and William Kerby who represented all of the members of the Board of Directors of Monaker resigned as directors of RealBiz
effective Monday April 11, 2016.
Through October 2015, the Company received and/or
made advances to/from its unconsolidated affiliated company, RealBiz Media Group, Inc. resulting in a net receivable due from RealBiz
in excess of $5.8 million. At February 29, 2016, Monaker owned 44,470,101 shares of RealBiz Series A Preferred Stock and 10,359,890
shares of RealBiz common stock, representing 28% ownership of RealBiz. The equity interest, along with a net receivable balance
due from the above-mentioned transactions, has been written down to zero ($0) to reflect the realizable value of this investment
and asset.
On November 20, 2015, the Company entered
into two exchange agreements (the “
Exchange
”) in which it exchanged an aggregate of $1,330,115 of the Company’s
convertible promissory notes and accrued interest (the “
Notes
”) for an aggregate of 532,046 shares of the Company’s
common stock (calculated at $2.50 per share of common stock for the Notes). The exchanged Notes consisted of the following: (i)
$764,384 of Notes were exchanged by Monaco Investment Partners II, LP (“
Monaco Investments
”) for 305,754 shares
of common stock; and (ii) $565,731 of Notes were exchanged by the Trust for 226,292 shares of common stock. Donald P. Monaco, a
member of our Board of Directors, is the managing general partner of Monaco Investments and the trustee of the Trust.
During the year ended February 29, 2016, the Company
granted warrants to purchase 30,000 shares of common stock for the settlement of the Company’s note payable with Mark Wilton
(greater than 5% shareholder), of which warrants to purchase 89,300 shares of common stock were exercised; warrants to purchase
120,000 shares of common stock were cancelled; and warrants to purchase 176,743 shares of common stock expired.
On June 15, 2016, we entered into a revolving line
of credit agreement with Republic Bank, Inc. of Duluth, Minnesota, in the maximum amount of $1,000,000. Amounts borrowed under
the line of credit accrue interest at the Wall Street Journal U.S. Prime Rate plus 1% (updated daily until maturity), payable monthly
in arrears beginning on July 15, 2016. Any amounts borrowed under the line of credit are due on June 15, 2017. Amounts borrowed
under the line of credit are planned to be used for marketing initiatives, working capital and to repay $300,000 previously borrowed
from the Donald P. Monaco Insurance Trust, of which Donald Monaco, a Director of the Company, is the Trustee. The loan contains
standard and customary events of default. On June 16, 2016, we borrowed $450,000 under the line of credit.
On July 8, 2016, Stephen Romsdahl, a greater than
5% shareholder of the Company, exercised warrants to purchase 96,000 shares of common stock which had an exercise price of $0.25
per share for an aggregate of $24,000.
On August 23, 2016, Pat LaVecchia, our director,
converted 1,000 shares of Series D Preferred Stock into shares of common stock in connection with a special exchange conversion
whereby Series D Preferred Stock shareholders were offered a special conversion rate of $2.50 per share of the Company’s
common stock, provided accrued dividends were waived (instead of the stated $12.50 conversion price), into 2,000 shares of common
stock at $2.50 per share, valued at $5,000.
Effective September 8, 2016,
the Company sold 138,000 units, each consisting of one share of common stock and one warrant to purchase one share of common stock
(the “Units”), to Charcoal Investments Ltd. (“Charcoal”), which entity is owned by Simon Orange, who became
a member of the Board of Directors of the Company on January 5, 2017, in consideration for $345,000 or $2.50 per unit. The warrants
were evidenced by a Warrant to Purchase Common Stock (the “Charcoal Warrants”), had an exercise price of $2.50 per
share and an expiration date of September 7, 2017.
Also on September 8, 2016, the
Company entered into a consulting agreement with Mr. Orange, pursuant to which Mr. Orange agreed to provide the Company consulting
services by aiding the Company in financial, organizational and developmental advice during a twelve month period. In connection
with assisting with a $750,000 private offering of units (pursuant to which Charcoal subscribed for units as described above),
Mr. Orange received compensation consisting of cash, shares and warrants.
On October 26, 2016, Donald P.
Monaco Insurance Trust, of which Donald Monaco is the trustee and a Director of the Company, exercised warrants to purchase 280,000
shares of common stock with an exercise price of $1.50 per share.
On November 4, 2016, Mark Wilton,
a greater than 5% shareholder of the Company, was issued 114,770 shares of restricted common stock pursuant to a subscription agreement
for $99,800 in proceeds.
On December 1, 2016, Stephen
Romsdahl, a greater than 5% shareholder of the Company, exercised warrants to purchase 85,000 shares of common stock which had
an exercise price of $0.50 per share.
On December 20, 2016, we borrowed
$37,500 from In Room Retail, which was evidenced by a Promissory Note (“Note”) in the principal amount of $37,500,
which accrued interest at the rate of 6% per annum. William Kerby, our Chairman and Chief Executive Officer, is the managing member
of In Room Retail.
On January 26, 2017, the
Company, Mr. Orange, a director, and Charcoal, agreed to reduce the exercise price of the 158,000 warrants to purchase shares
of common stock (the “Warrants”) to $2.00 per share and Mr. Orange and Charcoal exercised all of the Warrants in
consideration for an aggregate of $316,000, and the Company issued Mr. Orange 20,000 shares of restricted common stock and
Charcoal 138,000 shares of restricted common stock, in connection with such exercise. In consideration for agreeing to
exercise the Warrants, the Company granted Mr. Orange warrants to purchase 20,000 shares of the Company’s common stock
and Charcoal warrants to purchase 138,000 shares of common stock, each with an exercise price of $2.00 per share and an
expiration date of January 25, 2020.
From February 6, 2017 to March 10, 2017, the Company
raised $1,550,000 from the sale of 775,000 units, each consisting of one share of restricted common stock and one warrant to purchase
one share of common stock (the “Units”), to fourteen accredited investors in a private offering, at $2 per Unit. Investors
in the offering included an entity owned by Donald P. Monaco, the Company’s director (100,000 Units for $200,000), and Robert
J. Post, the Company’s director (50,000 Units for $100,000). The warrants have an exercise price of $2.00 per share and a
term of three years, and include no cashless exercise rights.
Dividends in arrears on the outstanding Series A Preferred Stock shares
(which are beneficially owned by Donald P. Monaco, our director and William Kerby, our CEO and Chairman) total $1,025,233 and $838,272
as of February 28, 2017 and February 29, 2016, respectively.
On April 19, 2017, we issued 100,000 shares of common stock to Omar
Jimenez, a member of the Board of Directors and an executive of the Company, valued at $250,000, as a fiscal year-ended February
28, 2017 employee bonus.
Note 12 - Commitments and Contingencies
The Company leases its office space and certain
office equipment under non-cancellable operating leases. In accordance with the terms of the office space lease agreement, the
Company is renting the commercial office space, for a term of three years from January 1, 2016 through December 31, 2018. Monthly
rental costs for calendar years 2016, 2017 and 2018 are $6,500, $6,695 and $6,896, respectively. The rent for the years ended February
28, 2017 and February 29, 2016 was $79,665 and $227,694, respectively.
Our future minimum rental payments through February
28, 2018 amount to $80,742.
The following schedule represents obligations under
written commitments on the part of the Company that are not included in liabilities:
|
|
|
Current
|
|
|
Long Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
February 28, 2017
|
|
|
February 28, 2018
|
|
|
thereafter
|
|
|
Totals
|
|
Leases
|
|
|
$
|
80,742
|
|
|
$
|
68,959
|
|
|
$
|
—
|
|
|
$
|
149,701
|
|
Other
|
|
|
|
4,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
|
Totals
|
|
|
$
|
85,242
|
|
|
$
|
68,959
|
|
|
$
|
—
|
|
|
$
|
154,201
|
|
The Company is committed to pay three to six months’
severance in the case of termination or death to certain key officers.
Legal Matters
The Company is involved, from time to time, in
litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among
other things, matters involving breach of contract claims, intellectual property, employment issues, and other related claims and
vendor matters. The Company believes that the resolution of currently pending matters will not individually or in the aggregate
have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation
or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or
other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such
litigation or claims.
On March 14, 2014, Lewis Global Partners, LLC filed
a Complaint against us in the Ninth Judicial Circuit Court of Florida (Case Number CACE 14-005009) (the “Complaint”).
The Complaint alleges consulting fees in the form of 270,000 shares of common stock of RealBiz is due from us and sets forth causes
of action including ‘breach of contract’ and ‘breach of implied covenant of good faith and fair dealing’.
On August 18, 2016, the breach of implied covenant of good faith and fair dealing was dismissed and we filed an answer and affirmative
defenses to the breach of contract claim. The Company has no basis for determining whether there is any likelihood of material
loss associated with the claims and/or the potential and/or the outcome of the litigation.
On March 28, 2016, the Company was presented with
a Demand for Arbitration, pursuant to Rule 4(a) of the American Arbitration Association Commercial Rules of Arbitration, whereby
Acknew Investments, Inc. and Vice Regal Developments Inc. (Claimants) are arguing that $700,000 is due to them, even though they
have already been paid said amounts through preferred shares that were issued as a guarantee and which Claimants converted into
shares of common stock. In connection with the purchase of the stock of the entity that eventually became RealBiz Media Group,
Inc., the Company issued 380,000 shares of Monaker Series D Preferred Stock shares with a value of $1,900,000, which was considered
the $1,200,000 value of the stock portion of the purchase price, and was also meant to guaranty the payment of the balance of $700,000.
The Company contends that the obligation to pay the $700,000 was extinguished with the conversion of the Monaker Series D Preferred
Stock shares into shares of common stock. The date for arbitration has not been set and the Company will vehemently defend its
position.
On June 2, 2016, the Company paid an arbitration award of $81,572 ($73,959 plus interest of $7,613) to
Twelfth Child Entertainment, LLC for a License Agreement settlement for rights to air programs regarding “Foreclosure to
Fabulous” television programming on the Company’s previously owned media business that was sold on January 21, 2016.
The Company absorbed this settlement as part of its partnership commitment with Launch Media 360 which is an investment of the
Company.
Litigation related to RealBiz Media
Group, Inc. (“RealBiz”)
Case Number 1:16-cv-61017-FAM
On May 11, 2016, RealBiz filed a Complaint
against us in the United States District Court for the Southern District of Florida (the “Complaint”). The Complaint
alleges $1,287,517 is due from us to RealBiz, and seeks the recovery of such amount, plus pre-judgment interest from October 31,
2015 and costs. The Complaint alleges causes of action including ‘account stated’ and ‘unjust enrichment’.
On May 19, 2016, we filed an Answer and
Counterclaim to the Complaint (the “Counterclaim”) denying RealBiz’s allegations and claims and pleading affirmative
defenses including ‘failure to state a claim for which relief can be granted’, ‘set-off’ rights (including
that if there was any amount owed, RealBiz’s obligation to us far exceeded the $1.2 million amount that RealBiz alleges is
due to it), ‘mistake or error’, ‘unclean hands’, ‘waiver’, ‘release’, ‘breach
of contract’ (we allege there was an oral agreement that all intercompany balances would be written–off) and ‘rescission
of letter addressing partial balance due’ (confirming that a letter upon which RealBiz’s case is predicated was rescinded
shortly after its issuance and is of no force or effect). The Counterclaim against RealBiz alleges causes of action including ‘unjust
enrichment’ (we allege that the net amount due to us from RealBiz is in excess of $10 million dollars if there is no oral
agreement), ‘money had and received’, and ‘breach of contract’ (we allege there was an oral agreement that
all intercompany balances would be written–off), and seeks recovery of all actual damages, consequential damages and incidental
damages, if any, including but not limited to attorney’s fees and costs, plus-prejudgment and post-judgment interest. We
believe the claims asserted in the Complaint, as amended, are without merit and intend to vigorously defend ourselves against the
lawsuit while simultaneously seeking damages against RealBiz. The Company has no basis for determining whether there is any likelihood
of material loss associated with the claims and/or the potential and/or the outcome of the litigation.
Case No.: CACE-16-019818
On October 27, 2016, the
Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs, Inc.
and American Stock Transfer & Trust Company, LLC) for damages and injunctive relief from the defendant’s unreasonable
delay and/or refusal to register the transfer of certain securities. We instructed RealBiz to transfer our preferred or common
stock in RealBiz to certain of our shareholders on several occasions. Defendants, however, wrongfully refused to register the transfers
in violation of the Delaware Code and the terms of RealBiz’s preferred and common stock.
Case No.: 16-24978-CIV-GRAHAM
On November 30, 2016,
the Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. v. RealBiz Media Group, Inc., f/k/a Webdigs,
Inc. and American Stock Transfer & Trust Company, LLC) for damages and injunctive and declaratory relief, arising from RealBiz’s
declared cancellation, retirement, and/or termination of certain securities. RealBiz notified Monaker of its intent to unilaterally
cancel, retire, and/or terminate its preferred and common stock held by Monaker. RealBiz’s announced cancellation, retirement,
and termination was without Monaker’s consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s
preferred and common stock.
In December 2016, RealBiz
cancelled the 44,470,101 Series A preferred shares and 10,359,892 common shares which were held by the Company in connection with
an alleged over issuance of common shares relating to the conversion of Monaker’s dual convertible preferred shares. In December
2016, the Company filed a lawsuit against RealBiz in the 11th Circuit Federal Court seeking an injunction against RealBiz’s
action to claw back the aforementioned shares; the injunction was denied and the lawsuit is proceeding. Additionally, the Company
seeks to reverse the clawback in its entirety.
Case No.: 0:16-cv-62902-WJZ
A class action lawsuit has been filed against
us, William Kerby, our Chief Executive Officer and Chairman, Donald Monaco, our director, and D’Arelli Pruzansky, P.A., our
former auditor, in the U.S. District Court for the Southern District of Florida on behalf of persons who purchased our common stock
and exercised options between April 6, 2012 and June 23, 2016 (the “Class Period”). The case, McLeod v. Monaker Group,
Inc. et al, was filed on December 9, 2016. The lawsuit focuses on whether the Company and its executives violated federal securities
laws and whether the Company’s former auditor was negligent and makes allegations regarding the activities of certain Company
executives. The lawsuit alleges and estimates total shareholders losses totaling approximately $20,000,000. The lawsuit stems from
the Company’s announcement in June 2016 that it would have to restate its financial statements due to issues related to the
Company’s investment in RealBiz. The lawsuit asks the court to confirm the action is a proper class action. We believe the
claims asserted in the lawsuit are without merit and intend to vigorously defend ourselves against the claims made in the lawsuit.
The Company has no basis for determining whether there is any likelihood of material loss associated with the claims and/or the
potential and/or the outcome of the litigation. On February 16, 2017, we filed a Motion to Dismiss the lawsuit and on March 3,
2017, the Court entered an order staying discovery and all other proceedings pending resolution of the Motion to Dismiss.
Case No.: C.A 2017-0189
On March 14, 2017, we filed a lawsuit against RealBiz
pursuant to Section 220 of Delaware General Corporation Law, seeking relief in the form of an order compelling RealBiz to make
available to Monaker, for inspection and copying, certain corporate books and records as demanded by Monaker in a February 27,
2017 letter (the “Demand”). In addition to our statutory right to inspection under Section 220, we have contractual
rights to access books and records as outlined in the documents governing our investment in RealBiz. Monaker’s purpose in
making the Demand is, among other things, to: (1) determine the status of its investment and interest in RealBiz; (2) determine
the appropriateness of certain actions recently announced by RealBiz; (3) investigate suspected wrongdoing by certain officers
and directors of RealBiz; and (4) determine whether the RealBiz’s directors advanced their personal interests at the expense
of Monaker and other investors. RealBiz has declined to produce the requested books and records despite the Demand and communications
between the parties’ counsels, filed a motion to dismiss taking the position that the Company is no longer a shareholder
of RealBiz, and has insisted instead that Monaker serve a [second] request for production in a separate action, Monaker Group,
Inc. v. RealBiz Media Group, Inc., No. 1:16-cv-24978-DLG, currently pending in the Southern District of Florida (the “Florida
Action”).
The Company is unable
to determine the estimate of the probable or reasonable possible loss or range of losses arising from the above legal proceedings.
Note 13 – Business Segment Reporting
Accounting Standards Codification 280-16 “Segment
Reporting”, established standards for reporting information about operating segments in annual consolidated financial statements
and required selected information about operating segments in interim financial reports issued to stockholders. It also established
standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components
of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision
maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
The Company has one operating segment consisting
of various products and services related to its online marketplace of travel and related logistics including destination tours
/ activities, accommodation rental listings, hotel listings, air and car rental. The Company’s chief operating decision maker
is considered to be the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance
of the business and other activities at the single operating segment level.
Note 14 – Fair Value Measurements
The Company has adopted the provisions of ASC Topic
820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures
about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure
fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes
between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).
The hierarchy consists of three levels:
|
●
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
|
●
|
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
●
|
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Our assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The Company analyzes all financial instruments
with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives
and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease
in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions
between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.
In addition, the fair values of freestanding derivative instruments such as warrant and option derivatives are valued using the
Black-Scholes model.
The Company uses Level 3 inputs for its valuation
methodology for the warrant derivative liabilities and embedded conversion option liabilities as their fair values were determined
by using the Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted
to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations
as adjustments to fair value of derivatives.
The Company did not have exposure
to derivative liabilities or embedded conversion options as those instruments were repaid to the note-holder, converted
to equity positions by the note-holder, or relinquished as part of the sale of Next 1 Network, Inc. (see Note 5
– Acquisitions and Disposals)
.
There are no derivative liabilities as of February 28, 2017 and February
29, 2016.
The following table sets forth a summary of changes
in fair value of our derivative liabilities for the years ended February 28, 2017 and February 29, 2016:
|
|
|
February 28, 2017
|
|
|
|
February 29, 2016
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
287,149
|
|
Fair value of embedded conversion feature of:
|
|
|
|
|
|
|
|
|
Fair value above debt discount at issue date
|
|
|
|
|
|
|
|
|
Derivative liability expense at issue date
|
|
|
—
|
|
|
|
—
|
|
Change in fair value of embedded conversion feature of:
|
|
|
|
|
|
|
|
|
Retirement of securities
|
|
|
—
|
|
|
|
(287,149 )
|
|
Gain on change in fair value of derivatives
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
Ending balance
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company has $-0- convertible promissory notes
that include embedded conversion options at February 28, 2017 and February 29, 2016. During FYE February 29, 2016, the Company
retired $287,149 of derivative liability attributable to six (6) convertible promissory notes with embedded conversion options
that were retired.
Note 15 – Income Taxes
Monaker follows the guidance of ASC 740, “Income
Taxes.” Deferred income taxes reflect the net effect of (a) temporary differences between carrying amounts of assets and
liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards.
No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes
were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized,
as it is not deemed likely to be realized.
The provision for income taxes consists of the
following components for the years ended February 28, 2017 and February 29, 2016:
|
|
2017
|
|
|
2016
|
|
Current
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The components of deferred income tax assets and
liabilities for the years ended February 28, 2017 and February 29, 2016, are as follows:
|
|
2017
|
|
|
2016
|
|
Net operating loss carry-forwards
|
|
$
|
27,018,698
|
|
|
$
|
22,261,904
|
|
Equity based compensation
|
|
|
4,329,000
|
|
|
|
4,329,000
|
|
Amortization and impairment of intangibles
|
|
|
1,779,820
|
|
|
|
64,770
|
|
Total deferred assets
|
|
|
33,127,518
|
|
|
|
26,655,674
|
|
Valuation allowance
|
|
|
(33,127,518
|
)
|
|
|
(26,655,674
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The income tax provision differs from the expense
that would result from applying statutory rates to income before income taxes principally because of the valuation allowance on
net deferred tax assets for which realization is uncertain.
The effective tax rates for years ended February
28, 2017 and February 29, 2016 were computed by applying the federal and state statutory corporate tax rates as follows:
|
|
2017
|
|
|
2016
|
|
Statutory Federal income tax rate
|
|
|
-35
|
%
|
|
|
-35
|
%
|
State taxes, net of Federal
|
|
|
-4
|
%
|
|
|
-4
|
%
|
Permanent difference
|
|
|
11
|
%
|
|
|
13
|
%
|
Change in valuation allowance
|
|
|
28
|
%
|
|
|
26
|
%
|
|
|
|
0
|
%
|
|
|
0
|
%
|
The valuation allowance has increased by
$6,472,000 for fiscal year end 2017 primarily as a result of a current year operating loss of $6,472,000 including
amortization of intangibles of $1,780,000.
The net operating loss (“NOL”) carry-forward
balance as of February 28, 2017 is approximately $58 million expiring between 2025 and 2037. Management has reviewed the provisions
of ASC 740 regarding assessment of their valuation allowance on deferred tax assets and based on that criteria determined that
it does not have sufficient taxable income to offset those assets. Therefore, management has assessed the realization of the deferred
tax assets and has determined that it is more likely than not that they will not be realized and has provided a full valuation
allowance against these assets. The utilization of the NOL’s may be limited
by Internal Revenue Code Section 382 which restricts annual utilization following a greater than 50% change in ownership.
At the adoption date the Company applied ASC 740
to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC 740, the Company
did not recognize a material increase in the liability for uncertain tax positions as of February 28, 2017.
Note 16 – Earnings Per Share
The following table provides a reconciliation of
the numerators and denominators of the basic and diluted earnings per-share computations for each of the past two fiscal years:
|
|
Income
(Numerator)
|
|
Weighted
Average
Shares
(Denominator)
|
|
Per Share
Amount
|
For the year ended February 28, 2017:
|
|
|
|
|
|
|
Basic earnings (losses)
|
|
$
|
(6,536,614
|
)
|
|
|
8,611,455
|
|
|
$
|
(0.76
|
)
|
Effect of dilutive securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Dilutive earnings
|
|
$
|
(6,536,614
|
)
|
|
|
8,611,455
|
|
|
$
|
(0.76
|
)
|
For the year ended February 29, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
|
|
$
|
(4,550,484
|
)
|
|
|
2,913,266
|
|
|
$
|
(1.56
|
)
|
Effect of dilutive securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Dilutive earnings
|
|
|
(4,550,484
|
)
|
|
|
2,913,266
|
|
|
$
|
(1.56
|
)
|
Basic earnings per share are computed by dividing
net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is
computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially
dilutive securities outstanding during each period. Diluted loss per common share is not presented because it is anti-dilutive.
Note 17 – Subsequent Events
The Company has evaluated subsequent events occurring
after the balance sheet date and has identified the following:
Case No.: C.A 2017-0189
On March 14, 2017, we filed a lawsuit against RealBiz
pursuant to Section 220 of Delaware General Corporation Law, seeking relief in the form of an order compelling RealBiz to make
available to Monaker, for inspection and copying, certain corporate books and records as demanded by Monaker in a February 27,
2017 letter (the “Demand”). In addition to our statutory right to inspection under Section 220, we have contractual
rights to access books and records as outlined in the documents governing our investment in RealBiz. Monaker’s purpose in
making the Demand is, among other things, to: (1) determine the status of its investment and interest in RealBiz; (2) determine
the appropriateness of certain actions recently announced by RealBiz; (3) investigate suspected wrongdoing by certain officers
and directors of RealBiz; and (4) determine whether RealBiz’s directors advanced their personal interests at the expense
of Monaker and other investors. RealBiz has declined to produce the requested books and records despite the Demand and communications
between the parties’ counsels, filed a motion to dismiss taking the position that the Company is no longer a shareholder
of RealBiz, and has insisted instead that Monaker serve a [second] request for production in a separate action, Monaker Group,
Inc. v. RealBiz Media Group, Inc., No. 1:16-cv-24978-DLG, currently pending in the Southern District of Florida (the “Florida
Action”).
Additionally:
|
●
|
On March 7, 2017, we received $150,000 in proceeds and issued 75,000
shares of restricted common stock and warrants to purchase 75,000 shares of common stock expiring on March 6, 2020, with an exercise
price of $2.00 per shares via a subscription agreement to an accredited investor in a private transaction.
|
|
●
|
On March 9, 2017, we received $100,000 in proceeds and issued 50,000
shares of common stock and warrants to purchase 50,000 shares of common stock expiring on March 8, 2020, with an exercise price
of $2.00 per shares via a subscription agreement to an accredited investor in a private transaction.
|
|
●
|
On March 10, 2017, we received $100,000 in proceeds and issued
50,000 shares of common stock and warrants to purchase 50,000 shares of common stock expiring March 9, 2020, with an exercise price
of $2.00 per shares via a subscription agreement to an accredited investor in a private transaction.
|
|
●
|
On March 10, 2017, we
issued 2,000 shares of common stock, valued at $4,000, for payment due pursuant to the terms of a consulting
agreement.
|
|
●
|
On March 17, 2017, we issued 10,000 shares of common stock, valued at $20,000, for payment
due pursuant to the terms of a consulting agreement.
|
|
●
|
On April 3, 2017, we received $10,000 in proceeds and issued 5,000
shares of common stock and common stock warrants to purchase 5,000 shares of common stock expiring April 2, 2020 with an exercise
price of $2.00 per shares pursuant to a subscription agreement with an accredited investor in a private transaction.
|
|
●
|
On April 17, 2017, we issued 800 shares of common stock, valued at $1,600 and common
stock warrants to purchase 800 shares of common stock, expiring April 16, 2020 with an exercise price of $2.00 per share, for commission
due per consulting agreement terms.
|
|
●
|
On April 18, 2017, we issued 10,000 shares of common stock, valued at $20,000, for payment
due pursuant to the terms of a consulting agreement.
|
|
●
|
On April 18, 2017, we received $114,888 in proceeds and issued 57,444 shares of common
stock to Stephen Rohsdahl, a 5% shareholder in the Company, in connection with a warrant exercise for $2.00 per share
|
|
●
|
On April 19, 2017, we issued 100,000 shares of common stock to Omar Jimenez, a member
of the Board of Directors and an executive of the Company, valued at $250,000, as a fiscal year-ended February 28, 2017 employee
bonus.
|
|
●
|
On April 28, 2017, we received $15,000 in proceeds and issued 10,000 shares of common
stock in connection with a cashless warrant exercise for $1.50 per share.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: May 8, 2017
|
|
MONAKER GROUP, INC.
|
|
|
|
|
By:
|
/s/ William Kerby
|
|
|
William Kerby
|
|
|
Chief Executive Officer
|
|
|
and Chairman
|
|
|
(Principal Executive Officer)
|
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ William Kerby
|
|
Chief Executive Officer and Chairman
|
|
May 8, 2017
|
William Kerby
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Omar Jimenez
|
|
Chief Financial Officer and Chief Operating Officer
|
|
May 8, 2017
|
Omar Jimenez
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Pat LaVecchia
|
|
Director
|
|
May 8, 2017
|
Pat LaVecchia
|
|
|
|
|
|
|
|
|
|
/s/ Donald P. Monaco
|
|
Director
|
|
May 8, 2017
|
Donald P. Monaco
|
|
|
|
|
|
|
|
|
|
/s/ Doug Checkeris
|
|
Director
|
|
May 8, 2017
|
Doug Checkeris
|
|
|
|
|
|
|
|
|
|
/s/ Simon Orange
|
|
Director
|
|
May 8, 2017
|
Simon Orange
|
|
|
|
|
|
|
|
|
|
/s/ Robert J. Post
|
|
Director
|
|
May 8, 2017
|
Robert J. Post
|
|
|
|
|
EXHIBIT INDEX
|
|
|
|
|
|
Incorporated By Reference
|
Exhibit No.
|
|
Description
|
|
Filed or Furnished Herewith
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
File No.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Articles of Incorporation
|
|
|
|
SB-2
|
|
3.1
|
|
8/14/2006
|
|
333-136630
|
3.2
|
|
Certificate of Amendment to Articles of Incorporation (changing name to Next 1 Interactive, Inc. and increasing authorized shares)
|
|
|
|
S-1/A
|
|
3.1.2
|
|
3/12/2009
|
|
333-154177
|
3.3
|
|
Certificate of Change Filed Pursuant to NRS 78.209
|
|
|
|
8-K
|
|
3.1
|
|
5/21/2012
|
|
000-52669
|
3.4*
|
|
Amendment to Certificate of Designation of Series A 10% Cumulative Convertible Preferred Stock, filed with the Secretary of State of Nevada on October 22, 2009
|
|
|
|
X
|
|
|
|
|
|
|
3.5
|
|
Amendment to the Articles of Incorporation of Next 1 Interactive, Inc. changing its name to Monaker Group, Inc. and affect a 1-for-50 reverse stock split
|
|
|
|
8-K
|
|
3.1
|
|
6/26/2015
|
|
000-52669
|
3.6
|
|
Amended and Restated Certificate of Designations of Series A 10% Cumulative Convertible Preferred Stock of Next 1 Interactive, Inc.
|
|
|
|
8-K
|
|
3.1
|
|
7/9/2013
|
|
000-52669
|
3.7
|
|
Amendment to Certificate of Designation of Series A 10% Cumulative Convertible Preferred Stock, filed with the Secretary of State of Nevada on October 22, 2009
|
|
|
|
S-1
|
|
3.6
|
|
9/23/2016
|
|
333-213753
|
3.8
|
|
Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock of Next 1 Interactive, Inc.
|
|
|
|
10-K
|
|
3.6
|
|
6/13/2013
|
|
000-52669
|
3.9
|
|
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of Next 1 Interactive, Inc.
|
|
|
|
10-K
|
|
3.7
|
|
6/13/2013
|
|
000-52669
|
3.10
|
|
Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock of Next 1 Interactive, Inc.
|
|
|
|
10-K
|
|
3.8
|
|
6/13/2013
|
|
000-52669
|
3.11
|
|
Amendment to Certificate of Designation of Series C Convertible Preferred Stock of Next 1 Interactive, Inc.
|
|
|
|
8-K
|
|
3.1
|
|
7/9/2014
|
|
000-52669
|
3.12
|
|
Amendment to Certificate of Designation of Series D Convertible Preferred Stock of Next 1 Interactive, Inc.
|
|
|
|
8-K
|
|
3.2
|
|
7/9/2014
|
|
000-52669
|
3.13
|
|
Bylaws
|
|
|
|
SB-2
|
|
3.2
|
|
8/14/2006
|
|
333-136630
|
4.1
|
|
Common Stock Purchase Warrant, issued October 26, 2010, in favor of Lincoln Park Capital Fund, LLC
|
|
|
|
8-K
|
|
4.1
|
|
9/2/2010
|
|
000-52669
|
10.1***
|
|
Employment Agreement between the Company and William Kerby dated October 15, 2006
|
|
|
|
S-1/A
|
|
10.2
|
|
3/12/2012
|
|
333-154177
|
10.2
|
|
$500,000 Promissory Note, dated August 26, 2010, issued in favor of The Mark Travel Corporation
|
|
|
|
8-K
|
|
4.1
|
|
9/2/2010
|
|
000-52669
|
10.3
|
|
$3,500,000 Promissory Note, dated March 5, 2010, issued in favor of Mark A. Wilton
|
|
|
|
8-K
|
|
10.1
|
|
3/10/2010
|
|
000-52669
|
10.4
|
|
Note Amendment between the Company and Mark Wilton dated February 24, 2014
|
|
|
|
8-K
|
|
4.1
|
|
2/27/2014
|
|
000-52669
|
10.5
|
|
Note Amendment between the Company and Mark Wilton dated May 15, 2015
|
|
|
|
8-K
|
|
4.1
|
|
5/21/2015
|
|
000-52669
|
10.6
|
|
Form of Cashless Warrant to Purchase Common Stock
|
|
|
|
8-K
|
|
4.1
|
|
10/13/2015
|
|
000-52669
|
10.7
|
|
Exchange Agreement by and between Monaker Group, Inc. and Monaco Investment Partners II, LP dated November 20, 2015
|
|
|
|
8-K
|
|
10.1
|
|
11/24/2015
|
|
000-52669
|
10.8
|
|
Exchange Agreement by and between Monaker Group, Inc. and Donald P. Monaco Insurance Trust dated November 20, 2015
|
|
|
|
8-K
|
|
10.2
|
|
11/24/2015
|
|
000-52669
|
10.9
|
|
License Agreement, dated April 28, 2015, by and between Next 1 Interactive, Inc. and RealBiz 360 Inc.
|
|
|
|
10-K
|
|
10.10
|
|
6/16/2015
|
|
000-52669
|
10.10
|
|
Code Purchase Agreement, dated April 28, 2015, by and between Next 1 Interactive, Inc. and RealBiz Media Group, Inc.
|
|
|
|
10-K
|
|
10.11
|
|
6/16/2015
|
|
000-52669
|
10.11
|
|
Services Agreement, dated April 28, 2015, by and between Next 1 Interactive, Inc. and RealBiz Media Group, Inc.
|
|
|
|
10-K
|
|
10.12
|
|
6/16/2015
|
|
000-52669
|
10.12***
|
|
Employment Agreement dated January 21, 2016, by and between Monaker Group, Inc. and Omar Jimenez
|
|
|
|
8-K
|
|
10.1
|
|
1/26/2016
|
|
000-52699
|
10.13
|
|
$300,000 Promissory Note dated June 2, 2016, representing amounts borrowed by Monaker Group, Inc. from the Donald P. Monaco Insurance Trust
|
|
|
|
8-K
|
|
10.1
|
|
6/6/2016
|
|
000-52699
|
10.14
|
|
Agreement and Plan of Merger, dated October 26, 2015 by and between Monaker Group Inc., AOV Holdings, Inc. and AlwaysOnVacation, Inc.
|
|
|
|
10-K
|
|
10.1
|
|
6/23/2016
|
|
000-52669
|
10.15
|
|
Intellectual Property License to Corporation by Licensor, dated November 25, 2015 by and among Monaker Group, Inc. and CJ Software, Inc.
|
|
|
|
10-K
|
|
10.2
|
|
6/23/2016
|
|
000-52669
|
10.16
|
|
Assignment of IP and Other Assets dated January 22, 2016 by and between Monaker Group, Inc. and AlwaysOnVacation, Inc.
|
|
|
|
10-K
|
|
10.3
|
|
6/23/2016
|
|
000-52669
|
10.17
|
|
Assignment of IP and Other Assets dated January 22, 2016 by and between Monaker Group, Inc. and Next 1 Networks, Inc.
|
|
|
|
10-K
|
|
10.4
|
|
6/23/2016
|
|
000-52669
|
10.18
|
|
Stock Purchase Agreement dated January 23, 2016 by and between Monaker Group, Inc. and BC 1062800 Ltd. for the sale of Next 1 Networks, Inc.
|
|
|
|
10-K
|
|
10.5
|
|
6/23/2016
|
|
000-52669
|
10.19
|
|
Stock Purchase Agreement dated January 23, 2016 by and between Monaker Group, Inc. and BC 1062800 Ltd. for the sale of AlwaysOnVacation, Inc.
|
|
|
|
10-K
|
|
10.6
|
|
6/23/2016
|
|
000-52669
|
10.20
|
|
Deed of Settlement, dated February 26, 2016, by and between Ryanair Limited and AlwaysOnVacation, Inc.
|
|
|
|
10-K
|
|
10.7
|
|
6/23/2016
|
|
000-52669
|
10.21
|
|
Settlement Agreement Televisual Media Holdings, LLC and Monaker Group, Inc. dated May 24, 2015
|
|
|
|
10-K
|
|
10.8
|
|
6/23/2016
|
|
000-52669
|
10.22
|
|
Membership Interest Purchase Agreement dated May 16, 2016, by and between Jasper Group Holdings, Inc. and Monaker Group, Inc.
|
|
|
|
10-K
|
|
10.9
|
|
6/23/2016
|
|
000-52669
|
10.23
|
|
Promissory Note ($750,000) dated June 16, 2016, by Monaker Group, Inc. in favor of Crystall Falls Investments, LLC
|
|
|
|
10-K
|
|
10.10
|
|
6/23/2016
|
|
000-52669
|
10.24
|
|
Line of Credit Agreement dated June 15, 2016 by and between Monaker Group, Inc. and Republic Bank, Inc.
|
|
|
|
10-K
|
|
10.11
|
|
6/23/2016
|
|
000-52669
|
10.25
|
|
Note Amendment between the Company and Mark Wilton dated February 29, 2016
|
|
|
|
10-Q
|
|
4.1
|
|
7/20/2016
|
|
000-52669
|
10.26*
|
|
Subscription and Investment Representation Agreement dated September 8, 2016, between Monaker Group, Inc. and Charcoal Investments Ltd.
|
|
|
|
X
|
|
|
|
|
|
|
10.27
|
|
December 31, 2016, Letter of Engagement with Capital Market Access
|
|
|
|
10-Q
|
|
20.20
|
|
11/30/2016
|
|
000-52669
|
10.28
|
|
August 31, 2016, Marketing and Stock Exchange Agreement with Recruiter.com, Inc.
|
|
|
|
10-Q
|
|
20.20
|
|
11/30/2016
|
|
000-52669
|
10.29***
|
|
Consulting Agreement between Simon Orange and the Company dated September 8, 2016
|
|
|
|
8-K
|
|
10.2
|
|
2/8/2017
|
|
000-52669
|
10.30
|
|
Form of Orange and Charcoal September 8, 2016 Warrants to Purchase Common Stock
|
|
|
|
8-K
|
|
10.3
|
|
2/8/2017
|
|
000-52669
|
10.31
|
|
Form of Orange and Charcoal January 26, 2017 Warrants to Purchase Common Stock
|
|
|
|
8-K
|
|
10.4
|
|
2/8/2017
|
|
000-52669
|
10.32
|
|
Form of Subscription Agreement for Units (February and March 2017)
|
|
|
|
8-K
|
|
10.1
|
|
3/10/2017
|
|
000-52669
|
10.33
|
|
Form of Warrant (February and March 2017 Subscriptions)
|
|
|
|
8-K
|
|
10.2
|
|
3/10/2017
|
|
000-52669
|
10.34*
|
|
Joint Venture Acquisition Agreement between the Company and Launch 360 Media Inc. dated June 5, 2014
|
|
|
|
X
|
|
|
|
|
|
|
10.35*
|
|
$750,000 Promissory Note dated May 16, 2016, between Crystal Falls Investments, LLC as borrower and the Company as Lender
|
|
|
|
X
|
|
|
|
|
|
|
10.36*
|
|
Amendment to Line of Credit Agreement dated December 22, 2016 by and between Monaker Group, Inc. and Republic Bank, Inc.
|
|
|
|
X
|
|
|
|
|
|
|
14.1
|
|
Code of Ethics
|
|
|
|
S-1/A
|
|
14.1
|
|
3/12/2009
|
|
333-154177
|
14.2
|
|
Code of Business Conduct
|
|
|
|
S-1/A
|
|
14.2
|
|
3/12/2009
|
|
333-154177
|
14.3
|
|
Whistleblower Protection Policy
|
|
|
|
8-K
|
|
14.1
|
|
4/25/2017
|
|
000-52669
|
21.1*
|
|
Subsidiaries
|
|
X
|
|
|
|
|
|
|
|
|
31.1*
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
X
|
|
|
|
|
|
|
|
|
31.2*
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
X
|
|
|
|
|
|
|
|
|
32.1**
|
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
|
|
|
|
32.2**
|
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
|
|
|
|
99.1
|
|
Charter of the Audit Committee
|
|
X
|
|
8-K
|
|
99.1
|
|
4/25/2017
|
|
000-52669
|
99.2
|
|
Charter of the Compensation Committee
|
|
X
|
|
8-K
|
|
99.2
|
|
4/25/2017
|
|
000-52669
|
99.3
|
|
Charter of the Nominating and Corporate Governance Committee
|
|
X
|
|
8-K
|
|
99.3
|
|
4/25/2017
|
|
000-52669
|
101.INS
|
|
XBRL Instance Document
|
|
X
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Schema Document
|
|
X
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Calculation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Definition Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Label Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Presentation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
***
|
Indicates a management contract or any compensatory plan, contract or arrangement.
|